What’s Actually Covered? Survey Finds Homeowners Struggle to Understand Insurance Policies

What’s Actually Covered? Survey Finds Homeowners Struggle to Understand Insurance Policies

If you’re unsure what your homeowners insurance actually covers, you’re not alone. A new survey from Guardian Service found that more than 50% of homeowners don’t feel confident in their understanding of their policy, and 41% mistakenly believe that flood damage is covered under a standard plan…when it usually isn’t.

That kind of misunderstanding could lead to expensive surprises when disaster hits. Understanding the basics of home insurance is more important than ever, especially as extreme weather becomes more common.

We surveyed 2,000 American homeowners to measure how well they understand their insurance coverage and what their lack of knowledge could cost them. The results show widespread confusion about what’s covered, how deductibles work, and how much protection homeowners actually have. Insurance isn’t doing its job if people don’t know how it works. The good news? A little clarity goes a long way.

About Guardian Service: We’re an independent insurance agency reimagining the insurance experience for homeowners. Our agents aren’t commissioned (seriously — zero commission), and our entire model is based on getting the right coverage for each person by continually re-shopping across 50+ carriers. It’s insurance designed to adapt to homeowners, not the other way around.

Key Takeaways

• 85% of homeowners feel moderately to extremely confident in their understanding of their policy — but only 29% aced a five-question quiz on basic insurance terms.

• 68% don’t know what “actual cash value” really means.

• 41% believe flood damage is covered by standard policies (it’s not).

• 39% of homeowners have less than $2,500 saved for emergency repairs.

• 33% have taken zero steps to protect their homes from weather-related damage.

Nearly Half of Homeowners Overestimate Their Knowledge

Plenty of homeowners say they feel confident in their knowledge of their insurance coverage, but the numbers tell a different story. In our survey, nearly half (48%) rated themselves as either “very” or “extremely” confident in understanding their policy. But at the same time, only 29% answered all five basic insurance terms correctly, and 31% failed the quiz entirely.

Many people assume they understand terms like “deductible,” “premium,” or “replacement cost,” yet only 32% identified “actual cash value” correctly. Nearly 25% mixed up premiums and deductibles. That kind of misinterpretation leads to misunderstandings that show up when it matters most. Among homeowners who had filed a claim, 26% were surprised by something that wasn’t covered. About 30% described the process as slower or more confusing than expected, and 1 in 5 said they wished they had understood their coverage better before filing.

Jon Ruggiero, a licensed insurance agent and Vice President of Sales at Guardian Service, explained one of the most common blind spots. “Most standard homeowners insurance policies will cover wind-related damage caused by a hurricane, things like shingles flying off your roof, broken windows, and damage to the structure or contents of your home. However, a huge point of confusion is that these policies don’t cover flooding or storm surge, which often cause the most damage in a hurricane. For that, you need a separate flood insurance policy. Many people assume they’re covered for ‘hurricane damage’ and don’t realize it’s not that simple until it’s too late.”

Test your home insurance knowledge!

Can you match five home insurance terms to their definitions?

▼ Show/Hide Quiz

Replacement Cost

Liability Coverage

Premium

Deductible

Actual Cash Value

The amount you pay monthly or annually for your insurance policy

Covers the cost to rebuild/replace your property with similar materials at today’s prices

Covers the cost to replace items minus depreciation

The amount you pay out-of-pocket before insurance coverage kicks in

Protection if someone is injured on your property or you damage others’ property

Check Answers Try Again

Passive vs. Active Homeowners—And Why It Matters

Our survey identified two distinct types of homeowners when it comes to managing their insurance: active managers and passive managers. Active managers, who make up 16% of respondents, shop for insurance annually and tend to feel more confident in their coverage. In fact, 21% of active managers rated themselves as “extremely confident” in their understanding of their policy. Passive managers — 54% of respondents — shop less frequently, typically every four or more years, only when rates spike, or rarely or never at all. Only 9% of this group reported feeling “extremely confident.” Even when homeowners believe they understand their policies, complex language and unclear coverage limits can still lead to unexpected gaps.

The reasons behind passivity vary by generation. For example, Baby Boomers are more likely to be passive, with 38% rarely or never shopping, while Millennials and Gen Z tend to be more active, with 22% and 23% rarely or never shopping, respectively. Conversely, Gen Z and Millennials are more likely to shop every 2–3 years compared to older generations.

The differences between active and passive managers extend beyond shopping habits. Active shoppers were twice as likely to feel “extremely confident” that they understand what their homeowners insurance policy covers. They also used online comparison tools 2.5 times more often than passive shoppers (23% versus 9%).

Engagement with insurance options correlates strongly with confidence and clarity. Passive management may be costing homeowners not only peace of mind — it could be costing them money, too, given the potential consequences of outdated or insufficient coverage.

Insurance Literacy by Generation

Many rely on others for insurance decisions and turn to credit cards or personal loans in a crisis. Across all age groups, fewer than one-third passed the terminology quiz, highlighting a widespread gap between perceived and actual understanding.

Quiz results reflect that disconnect. While 49% of Gen Z respondents said they were very confident in their insurance knowledge, only 28% passed the quiz and just 13% got a perfect score, the lowest across generations. Millennials did slightly better, with 58% passing and 25% getting all correct. Gen X and Boomers were the top performers, with 80% and 90% passing, respectively, and 37% of each group answering everything correctly.

Nearly half of Gen Z respondents (49%) said they were very confident in understanding their insurance policy, the highest of any generation. At the same time, 14% said someone else handles their insurance for them. When faced with emergency expenses, Gen Z was the most likely to borrow, relying on credit cards (45%), personal loans (22%), or help from family and friends (22%).

Baby Boomers emerged as the most financially prepared generation in our survey, with 57% saying they would rely on emergency savings to cover repair costs. Gen Z, on the other hand, showed the highest confidence but the least hands-on control.

Millennials showed strong engagement, with 22% shopping for insurance annually, the highest rate of any generation. But they also expressed the most frustration. About 36% said shopping was too time-consuming, and 18% found it too confusing. Many relied on financing for repairs, including 41% who said they would use credit cards and 23% who would take out personal loans.

Generation X tended to take a middle-ground approach. Most described themselves as “moderately confident” (47%) and were less likely to switch providers. Many said they shop only when rates increase (19%) or rarely at all (29%). While less reliant on borrowing than younger generations, 29% still said they would use credit cards in a repair scenario.

Boomers were the most financially stable but also the least likely to revisit their coverage. About 38% said they rarely or never shop for insurance, and 29% said they “set it and forget it.” However, they reported the lowest rates of confusion and the highest levels of independent management.

Coverage Myths That Could Cost You Thousands

Too many homeowners believe they are covered for certain events that standard homeowners insurance policies typically do not include. One of the biggest surprises homeowners face after a storm is realizing they aren’t fully covered. Many people are unaware that flood damage isn’t covered under their homeowners policy. Others are shocked to learn they have a special hurricane or windstorm deductible that’s a percentage of their home’s value, not a flat amount — meaning thousands out of pocket.

There are also gaps in coverage for detached structures like sheds or guesthouses, and personal property limits that may not fully cover valuables like jewelry, electronics, or antiques unless specifically listed. Loss-of-use coverage (for hotel stays and relocation costs) often isn’t as generous as people expect. These gaps can make a bad situation even worse if the fine print hasn’t been carefully read, as Ruggiero explains.

Flood damage: Standard policies do not cover flooding caused by heavy rain, storm surge, or overflowing bodies of water. Flood insurance must be purchased separately through programs like the National Flood Insurance Program (NFIP). Floods are a leading cause of property damage, and homeowners who assume coverage could face significant out-of-pocket costs.

Earthquakes: Damage from earthquakes is generally excluded from standard homeowners insurance. Like flood coverage, earthquake insurance requires a separate policy or endorsement. This coverage is crucial in earthquake-prone areas but often overlooked elsewhere.

Fire and smoke: Fire and smoke damage are covered under nearly all standard homeowners policies, explaining why 83% of respondents correctly identified this. Coverage includes damage caused by accidental fires and smoke from fires within or outside the home.

Mold: Mold damage is usually excluded or only covered under specific conditions, such as if it results from a covered water damage event. Many policies have strict limits or outright exclusions for mold due to its complex and costly nature.

Understanding the specific coverages and the conditions that apply is important because risks vary widely depending on local weather patterns and natural disasters. Tailoring your insurance coverage to these unique factors can help avoid costly gaps in protection.

Ruggiero points out common mistakes that cause claims to be delayed or denied after a hurricane: “Delays and denials often come down to poor documentation or missteps in the early stages. Waiting too long to report damage, tossing out ruined items before they’re documented, or making permanent repairs without an adjuster’s sign-off can all complicate your claim. Another big one is assuming something is covered when it’s not—like flood damage under a homeowners policy. Always read your policy closely and don’t be afraid to ask questions before hurricane season ramps up.”

What Can You Do Right Now?

Preparing for storms or other natural disasters means understanding your insurance coverage and taking proactive steps to protect your home and belongings. It’s important to familiarize yourself with your policy’s scope around different insurance perils, such as flood, windstorm, or earthquake coverage, and how these may affect you. Here are expert-recommended actions from Jon Ruggiero to help you get ready:

• Review your current insurance policies with a trusted advisor. Make sure you fully understand what’s covered, what isn’t, and your deductibles—especially if you have separate hurricane or windstorm deductibles, which can be a percentage of your home’s value rather than a flat amount.

• Create a home inventory. Document your belongings through photos, videos, or a written list. Store this inventory safely, preferably in a digital format, to streamline the claims process if damage occurs.

• Take steps to protect your home now. Installing hurricane shutters, reinforcing doors and roofs, and completing other upgrades can reduce damage and might even earn you a discount on your insurance policy.

• Understand that initial insurance payments after a storm are often advances. They help start repairs or cover relocation costs but usually aren’t the final settlement. Claims can remain open for weeks or months as work progresses, and if an offer seems low, you can negotiate or hire a public adjuster to assist.

• Keep in mind that rising rebuilding costs mean underinsurance is a growing risk. Construction inflation and supply issues have driven up rebuilding expenses, but many policies haven’t kept pace. Regularly reviewing your dwelling coverage to reflect current costs is crucial.

Taking these steps before a storm hits can make a significant difference in protecting your property and peace of mind. Being proactive and informed will help you avoid surprises and navigate the claims process with confidence.

What Homeowners Wish They Knew

Methodology

Guardian Service surveyed 2,000 U.S. homeowners using Pollfish, a third-party market research and survey platform, to gain insights regarding their familiarity with their insurance policies, their knowledge of home insurance generally, and how prepared they feel for extreme weather. We collected survey data for this report on June 6, 2025, which coincided with the start of the hurricane season.

We weighted responses to align with population demographics across age and gender to be representative of all U.S. adults (aged 18+). The margin of error is +/- 2% with 95% confidence.

Fair Use Policy

We encourage journalists and reporters to share our findings on how prepared homeowners are for extreme weather. If you choose to do so, please link back to our original story to give us proper credit for our research.

For questions or expert insight into our research: dayna.edens@guardianservice.com