I know there are plenty of things most Americans aren’t all that knowledgeable about. European geography, the Bill of Rights and where President Barack Obama was born comes to mind.

However, something that American homeowners surprisingly lack knowledge of is their homeowners insurance coverage. It turns out that nearly half of homeowners believe the limits of their insurance coverage are linked to the market value of their home, according to a survey from the Insurance Information Institute (I.I.I.).

The fact is that a home’s market value has absolutely nothing to do with the amount of insurance one needs in order to financially protect their home, said Jeanne M. Salvatore, senior vice president and consumer spokesperson for the I.I.I. She emphatically states that the last thing a homeowner should ever do is reduce their insurance coverage because the value of their home has decreased. This could result in, as she puts it, a home being “dangerously underinsured.”

There are also homeowners who are just trying to cut costs. Instead of reducing the amount of coverage purchased, the smarter thing to do would be to take a higher deductible, according to the I.I.I. This can substantially reduce insurance costs for those whose budgets have been a little tighter recently.

Here’s what the I.I.I. says are the three biggest insurance mistakes a homeowner can make:

1. Insuring a home for its real estate value rather than for the cost of rebuilding.

2. Selecting an insurance company by price alone.

3. Dropping flood insurance.

Whether you’re buying a home, selling or insuring one, be sure to spread the good insurance word and don’t let people you know find themselves in a sticky insurance situation.