Survey: Nearly Half of Americans Unprepared for Disasters

June 3, 2008

As the nation braces for the hurricanes, wildfires, tornadoes and floods that accompany the spring and summer disaster season, nearly half of U.S. consumers are insufficiently prepared — in terms of their insurance coverage — to deal with potential losses, according to research by the National Association of Insurance Commissioners (NAIC).

The NAIC’s national survey revealed a significant lack of preparedness among consumers in documenting their belongings. Nearly half — 48 percent — said they did not have an inventory of their possessions. Of those consumers who reported having a checklist, 32 percent had not taken any pictures and 58 percent had no receipts validating the cost of their possessions. In addition, 44 percent of respondents acknowledged that they had not stored their inventory in a remote location.

“A comprehensive list of your belongings and their value will help you file an insurance claim after a disaster,” said NAIC President and Kansas Insurance Commissioner Sandy Praeger. “Creating an inventory and storing it in a safe location away from home is one of the most basic — and most effective — disaster preparedness steps anyone can take to help protect themselves and their financial future.”

The NAIC survey also found that 43 percent of U.S. adults with homeowners or renter’s insurance owned policies that provided a replacement cost payout. Of the remaining consumers, 27 percent indicated their policies insured their homes for the actual cash value, while another 28 percent did not know which type of coverage they purchased.

Actual cash value is the amount it would take to repair or replace damage to a home and its contents after depreciation. Replacement cost is the amount it would take to replace or rebuild a home or repair damages with materials of similar kind and quality, without deducting for depreciation.

“Many consumers are not able to recover after a disaster because they don’t realize how depreciation can impact their assets,” Praeger said. “It is important that consumers understand the implications of purchasing an actual cash value policy vs. replacement cost insurance. In the event of a disaster, the difference could mean thousands of dollars in payout.”

The NAIC survey also found that the majority of consumers do not have the coverage necessary to protect themselves from specific types of losses that are not reimbursed under standard policies:

— 69 percent do not have earthquake insurance.
— 65 percent do not have flood insurance.
— 56 percent do not have insurance for a water line break.
— 55 percent do not have insurance for a sewer line break.

“Many homeowners and renters are vulnerable, especially if they live in disaster-prone areas,” said NAIC Executive Vice President and CEO Catherine J. Weatherford. “Consumers should review their insurance policies yearly with their agent or company to make sure they have the coverage needed to protect their family and their belongings.”

The NAIC offers tips and considerations on insurance through its public education program, Insure U – Get Smart About Insurance, at www.InsureUonline.org. The site is also available in Spanish at www.insureuonline.org/espanol.

Source: NAIC

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