Homeowners Aren’t Waking Up to Insurance Risk — They’re Tripping On It

Homeowners don’t understand home insurance, and the process of obtaining it isn’t transparent so they are often lost and confused.

A COGNITION Smart Data survey on home insurance reveals some of the challenges with home insurance. There is not only a knowledge gap, there is a timing gap that puts them at a worse risk from more threatening climate events, affordability and housing stability.

Homeowners are only informed about home insurance because the system is breaking around them. The numbers tell the story:

• 15.8% of homeowners don’t understand supplemental insurance needs — meaning they don’t know that flood, wildfire, or earthquake coverage often require separate policies.
• 22.8% only learn about these gaps when they are choosing an insurance provider — essentially discovering fine print at the moment of purchase.
• 21.1% don’t find out until after they’ve already bought insurance — which is the worst possible moment to realize your coverage is incomplete.

So, the real issue is that a homeowner only learns about the risk that their house and their finances are under after they are in a climate event. Even as more climate events are forcing homeowners to be more insurance literate, insurers are going in the other direction and tightening coverage, raising premiums, and dropping policies — pushing homeowners into unfamiliar territory.

On top of that, mortgage lenders are increasingly requiring supplemental coverage, which makes this reactive pattern more dangerous because supplemental insurance is now critical for financial stability in a high‑risk climate era.

This is not a homeowner problem. It’s a system design problem.

With such a slim understanding of insurance needs, it’s now a climate‑resilience issue and housing affordability has to include the cost of multiple insurance layers.

That means everyone needs to take a role in informing the homeowner and providing solutions, such as better home design to lower risk. Insurance education also needs to shift to proactive or homeowners will continue to learn about risk only after they’re already living it.

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