N.J. Law Requires Insurers to Provide 1-Page Summary of Homeowners Coverage

May 7, 2013

New Jersey Gov. Chris Christie has signed into law on Monday a bill that aims to help homeowners better understand their insurance policies.

The legislation (A3642/S2502) requires homeowners’ insurers to give policyholders a one-page summary of the policy explaining “notable coverages and exclusions under the policy” that are “written in a simple, clear, understandable, and easily readable way.”

The one-page summary will be added to the homeowners insurance consumer information brochure that insurers are already required to provide when a homeowners policy is purchased or renewed.

The new law’s provisions would not be implemented until the New Jersey Department of Banking and Insurance establishes a specific timeline for the requirement.

“This summary must include notable coverage and exclusions under the policy, so that there will be no misunderstandings when consumers need to invoke their policy,” said New Jersey Assemblyman Ruben Ramos Jr. (D-Hudson) who was one of the co-sponsors of the bill.

“Following Sandy, many homeowners were shocked to learn some things they expected to be covered were not under their policy. It’s time for insurance companies to provide a clearer explanation,” Assemblyman Ramos said.

Last December, the New Jersey Assembly’s financial institutions and insurance committee held a hearing to review insurance issues facing residents in the aftermath of Sandy. Lawmakers said one issue that arose was that many homeowners were simply not aware of what their homeowner’s insurance policy covers and does not cover.

The bill’s sponsors said this legislation is an attempt to provide that information in a simple, easy to understand format that will hopefully allow homeowners to become more aware of their policy.

“One of the most important things we’ve learned from that hearing is that many consumers aren’t familiar with the specifics of their policy, particularly when it comes to storm-related coverage,” said Assemblyman Gary Schaer (D-Passaic/Bergen).

“Moving forward, everyone should take the time to educate themselves on the details of their policy to make sure that they have chosen the appropriate coverage to handle their unique needs. An educated consumer is the best consumer, especially when dealing with complex insurance claims,” Assemblyman Schaer said.

“Understanding fully the insurance fine print can be among the most daunting tasks consumers face,” said Assemblywoman Linda Stender (D-Union/Middlesex/Somerset).

“Sandy has shown us that many did not fully understand their policy, often through no fault of their own. Insurance companies need to provide clearer and better explanations of their policies, and this is a pro-consumer step in that direction,” Assemblywoman Stender said.

When the measure was first proposed, insurers expressed concern that the one-page summary might create legal vulnerabilities for insurers in cases involving potential lawsuits. Since then, lawmakers added an amendment to assuage insurers’ concern.

The lawmakers addressed insurers’ concern by adding an amendment that says the one-page summary shall explicitly state that it is only guidance and not the actual policy.

The amendment states: “The summary shall not be considered a replacement for the terms of the policy of insurance, shall not have the effect of altering the coverage afforded by the policy, and shall not confer new or additional rights beyond those expressly provided for in the policy. The summary shall expressly state that the summary is only provided as guidance to the homeowner in understanding the terms of the policy of insurance.”

Legislators also added an amendment that says the New Jersey Department of Banking and Insurance would decide the timeline for when the insurers would have to start providing the summary.

The amendment states: “This act shall take effect on the 90th day following enactment except that the act’s provisions shall not be implemented until the Department of Banking and Insurance, by regulation, issues a timeline for implementation.”

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