Facing declining home values, Californians may be dangerously opting to underinsure their homes, according to a statewide poll.
More than a quarter of the 800 people randomly interviewed in a poll commissioned by the Insurance Information Network of California indicated that they believed they should reduce the amount of insurance on their home because its value had declined.
According to the random statewide survey, 26 percent of Californians believe they should reduce their insurance coverage because the resale value of their home has dropped.
“This is a financially dangerous myth,” said IINC Executive Director Candysse Miller. “Just because the resale value of your home may have declined does not mean that the cost to rebuild it has also dropped — and that should be your target.”
Forty-three percent of those surveyed disagreed with the statement, “My home value has dropped over the last couple of years and therefore I can or should reduce my insurance policy coverage.” Still, a troubling number of respondents agreed with the comment, Miller said.
“To protect your investment, you should consult your insurance company or agent each year and review any changes that may increase the replacement value of your home or property,” Miller said. That includes remodeling projects and major purchases.
In a related question, respondents faired much better when asked for the best strategies for saving money on insurance.
Thirty-five percent smartly suggested comparison shopping multiple insurance companies, while another 30 percent said that buying both auto and home policies from one company would reduce their insurance costs — both proven techniques for managing household insurance costs.
Meanwhile, another 7 percent suggested reducing policy limits or increasing deductibles. While increasing deductibles can cut costs, policyholders should carefully evaluate their insurance needs before reducing policy limits, Miller said.
The poll was conducted for IINC by Public Opinion Strategies on Sept. 21-24, 2008, with a margin of error of 3.46 percent.
Past surveys by IINC revealed that while as many as two-thirds of Californians believe that homeowners have the primary responsibility to keep their insurance policies current, only about one-third had actually read their homeowners policy in the past year.
For more information, visit www.iinc.org.
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