Consumers not informed about homeowners insurance, study says

A large percentage of U.S. homeowners mistakenly believe that standard homeowners insurance protects them from an array of perils, according to research by the National Association of Insurance Commissioners, which recently hosted its summer conference in San Francisco. Yet, typical property and liability policies don’t cover home damage from floods, earthquakes, water line breaks, termites, mold, and several other perils.

The NAIC survey found that 33 percent of U.S. heads of household, who own a home and have homeowners insurance, incorrectly believe flood damages would be covered by a standard homeowners or property and liability policy.

“As we enter the 2007 hurricane season, we strongly encourage consumers in flood-prone areas to check whether they are properly covered,” said Walter Bell, NAIC president and Alabama Insurance Commissioner.

NAIC suggested the industry remind consumers that flood insurance polices generally are available from the National Flood Insurance Program and are often sold by agents that sell homeowners policies.

The NAIC survey also revealed other homeowner misunderstandings relating to common loss situations — none of which are covered by standard homeowners policies — such as:

•68 percent think vehicles such as cars, boats and motorcycles stolen from or damaged on their property are covered.

•51 percent think damages from a break in the water line on their property supplying water to their home are covered.

•37 percent think damages due to a break in the sewer line on their property that connects to their municipal sewer system are covered.

•35 percent think damages from earthquakes are covered.

•34 percent think damages from mold are covered.

•31 percent think damages from termites or other infestation are covered.

•22 percent think pets stolen from or injured on their property are covered.

“Many homeowners could be seriously harmed financially by misunderstandings about their insurance,” Bell said. “It’s critical that consumers look closely at their policies and ask their insurance agents detailed questions to become fully aware of what is, and what is not, covered.”

The NAIC survey also noted that 24 percent of respondents indicated their policies insured their homes for the actual cash value, while 64 percent said their policies covered the replacement cost. Another 12 percent said they did not know whether they had purchased actual cash value or replacement cost coverage.

Homeowners have fears of being sued, the survey indicated. Twenty-eight percent of respondents reported they were more concerned today than they were five years ago about being the target of a lawsuit. Yet according to the NAIC survey, a majority of homeowners — 63 percent — lack umbrella coverage.

To aid in education, the NAIC provides information, tips and considerations regarding homeowners insurance on its consumer education Web site, Insure U (www.InsureU online.org). The site is also available in Spanish (www.insureuonline.org/espanol).

Topics Flood Property Homeowners