With home construction costs hitting record highs in 2022, it’s more important than ever for homeowners to check if their insurance coverage is keeping up. [1] But a majority of homeowners haven’t reviewed, much less updated their policies in the last year — potentially leaving them without enough insurance to rebuild their home completely if it’s destroyed, according to the Policygenius Home Insurance & Inflation Shopping Survey.
86% of homeowners haven’t increased their home's coverage limit or added key coverages to their policy in the last year
The dwelling coverage limit on a homeowners insurance policy should be based on the home’s replacement value, or how much it would cost to rebuild based on the current price of building materials and labor. During periods of extreme inflation, it’s more important than ever for homeowners to check and update their dwelling limit at least once per year to ensure their coverage is keeping pace with rising replacement costs. Construction costs on single-family homes were up 16.8% in 2022 alone, according to the U.S. Census Bureau. [2]
Yet in the last year, just a combined 14% of homeowners raised their dwelling coverage limit (9%) or added key coverages to their policy (7%) to offset soaring inflation and high rebuild costs after a natural disaster.
While it’s possible that many homeowners already had adequate protection, just 44% said they had reviewed their insurance policy during that same period to see how much coverage they had. Of those homeowners, 22% increased their home's coverage limits or added to their policy, compared to just 8% of those who didn’t review their policy.
Many homeowners took action to lower their insurance costs in 2022 — particularly those who reviewed their policy in the last 12 months. These homeowners were more than twice as likely to get rid of coverage features they no longer felt they needed (7% vs. 3%) or increase their home insurance policy deductible (5% vs. 2%) as those who didn’t review their policy. And they were also more likely to bundle their home and auto policies (14% vs. 10%).
Rate-saving actions were the most common among younger homeowners (age 18 to 34), who were nearly twice as likely as other age groups to switch insurers for cheaper rates (31%), and around four times more likely to decrease their coverage limits or eliminate extra coverage features to lower their insurance bill.
1 in 3 homeowners are “very sure” they have enough home insurance to pay for a rebuild
Roughly 75% of homeowners said they’re at least “somewhat sure” their policy’s dwelling coverage limits were high enough to cover the cost to rebuild their home if it were destroyed. However, just 33% are “very sure” this was the case.
This aligns with what we've already seen in past surveys: A majority of homeowners aren't aware of how much home insurance coverage they need.
In addition to being more proactive about their insurance, homeowners who reviewed their policy since last year are also more likely to be “very sure” their house is fully insured (45%) compared to those who didn’t (24%), and less likely to be unsure about their home insurance (16% vs. 29%).
47% of homeowners may be without crucial coverages to protect against rising rebuild costs
To help lessen the impact of increased building costs and inflation, many insurers offer inflation guard coverage that automatically adjusts a policy’s coverage limits each year at renewal.
However, just 17% of homeowners are certain their policy includes this coverage, and a similarly low number (17%) have building ordinance protection to compensate for higher rebuild costs to get a home up to code.
As many as 68% of homeowners may be without guaranteed replacement cost coverage (including 33% who were unsure), and 80% may not have extended replacement cost coverage (also including the 33% who were unsure) — two vital coverages that automatically increase your policy limits to account for the rising cost of construction materials and labor after a natural disaster.
And 47% of all homeowners either have none of these coverages (14%) or aren’t sure if they have these coverages (33%), which means nearly half of insured homes may not be equipped to deal with unexpectedly high rebuild costs after a disaster.
Two in three (68%) homeowners who reviewed their policy in the last year have at least one of these coverages, 12% have none, and 20% aren’t sure. By comparison, fewer than half (42%) of homeowners who did not review their home insurance have at least one of these coverages, 15% have none, and 44% aren’t sure.
Amid rising inflation, most homeowners prioritize the best deal, ability to bundle policies when shopping for home insurance
While you may think of foiled home renovation plans or halted construction projects when considering housing-related price inflation, perhaps the most widely felt impact was on the cost of homeowners insurance. Home insurance premiums rose 12.1% on average from May 2021 to May 2022, with a startling 90% of homeowners seeing an increase at renewal, according to our Home Insurance Pricing Report.
It may come as no surprise then that when asked what they found most important in a company when shopping for home insurance, more homeowners chose getting the best possible deal (33%) over any other factor.
You can often find the best deal when you purchase two or more types of insurance policies (like auto and home) through the same company thanks to special bundling discounts. This may explain why the second largest number of homeowners (18%) considered “a place where I can purchase other types of insurance” to be most important when shopping for a policy.
Methodology
Policygenius commissioned YouGov to poll 2,542 American adults (aged 18+), 1,264 of whom confirmed owning a home with a homeowners insurance policy. The survey was carried out online from Jan. 19 through Jan. 23, 2023. The results have been weighted to represent all U.S. adults. The margin of error was between +/-1.4% and +/-4.2% depending on the question. Percentages were rounded to the nearest whole number, so some totals may not add up to 100.
About Policygenius
Policygenius is the online insurance marketplace combining cutting-edge technology with the expertise of real licensed agents to help people get the coverage they need to protect their family, property, and finances with confidence. Since 2014 we’ve helped over 30 million people shop for insurance and placed more than $150 billion in coverage from our headquarters in New York City and Durham, North Carolina.
