While the time it takes to learn the ins and outs of your homeowners’ policy could be a pain in the butt, it’s worth it in the long run. Not only will you know what is covered and not covered by your current policy but also you’ll have the knowledge for future homeowners’ insurance dealings.
An article in Connpost.com addresses the issue of understanding your homeowner policy, especially if you live in an area prone to flooding, earthquakes or storms. The article mentions a survey conducted by the National Association of Insurance Commissioners (NAIC) of “700 homeowners who carry insurance about their policies.” Needless to say the results were not stellar.
“The study found that, despite all the media coverage of Hurricane Katrina and its aftermath, one-third of those surveyed incorrectly believe flood damages would be covered by standard homeowners insurance policies.
Another misconception held by more than two-thirds of policyholders is the belief cars, boats or motorcycles stolen from their property or damaged on their property are covered by homeowners' policies.”
A couple of important points made in the article concern the amount of money insurers will pay if a house is destroyed by fire or a storm and the replacement of destroyed belongings. The following is from a MetLife survey of 1,200 homeowners and renters.
“There were a lot more incorrect and 'not sure' answers than we would like to see," said Matthew Cullina, director of product management for MetLife Auto & Home, which is based in Warwick, R.I.
In fact, the payout will reflect the cost of rebuilding, also known as replacement cost. It's generally capped at a lot less than the market value because it doesn't take the cost of the land into consideration, Cullina said.
A homeowner can determine a rough replacement cost equivalent by "asking a contractor in your area the cost per square foot for building a home" and running the calculation for your own residence.
Meanwhile, some 72 percent of those surveyed said they expected their insurance to cover the full cost to replace personal belongings destroyed in a fire or natural disaster.
When it comes to contents, the standard homeowners policy covers actual cash value, which is the cost of an item minus depreciation, Cullina said.
"You have to ask for replacement cost coverage, but I think it's worth the extra money," he said. Replacement cost is today's market value, without deducting for depreciation.”
Insurance is one of those topics that people go through life not understanding and hoping that what they hear from a friend of a friend is correct. It would be great if insurance agents were able to properly explain coverages to new clients without having the customer boild down the conversation to just cost. Too many people that saved a couple of bucks over lower limits or not electing a type of coverage are now ruined. It's a shame.
Posted by: Anonymous | July 21, 2007 9:45 PM | Permalink to Comment