FOR IMMEDIATE RELEASE
ISN'T COVERED BY YOUR HOMEOWNERS INSURANCE?
SAN FRANCISCO (June 4, 2007) - A large percentage of U.S. homeowners mistakenly believe that standard homeowners insurance protects them from a wide array of perils, according to new research by the National Association of Insurance Commissioners (NAIC). In fact, typical property and liability policies don't cover home damage from floods, earthquakes, water line breaks, termites, mold, and several other perils, large and small.
The 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, despite extensive media coverage on Hurricane Katrina victims whose claims were denied because they lacked flood insurance.
"Many homeowners learned the hard way that their insurance policies did not provide flood protection," said Walter Bell, NAIC President and Alabama Insurance Commissioner. "As we enter the 2007 hurricane season, we strongly encourage consumers in flood-prone areas to check whether they are properly covered."
According to the NAIC, flood insurance polices generally are available from the National Flood Insurance Program (NFIP) and are often sold by agents that sell homeowners policies.
"There are some limitations in flood insurance polices that differ from standard homeowners policies," Bell said. "Excess flood insurance is often available from private insurers when people seek to insure high-value homes that exceed the limits offered by the NIFP."
The NAIC survey also revealed other homeowner misunderstandings relating to common loss situations - none of which are covered by standard homeowners insurance policies - such as:
"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 revealed another type of potential consumer misunderstanding. Twenty-four 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 which type of coverage - actual cash value or replacement cost - 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.
"It's important that consumers understand this distinction," Bell said. "In the event of a covered loss, an actual cash value payout could be thousands of dollars lower than a benefit calculated at the replacement cost."
The NAIC survey also uncovered a growing concern among homeowners about being sued. Twenty-eight percent of respondents reported they were more concerned today than they were five years ago about being the target of a lawsuit.
"Consumers can better protect themselves from lawsuits by adding umbrella liability coverage to their homeowners policy," Bell said. According to the NAIC survey, a majority of homeowners - 63 percent - lack this umbrella coverage.
The NAIC provides extensive information, tips and considerations
regarding homeowners insurance on its consumer education Web site, Insure
U (www.InsureUonline.org). The entire site is also
available in Spanish (www.insureuonline.org/espanol).
"Consumers also should protect themselves from being scammed by fake insurance companies selling bogus insurance policies," said Catherine J. Weatherford, NAIC Executive Vice President and CEO. "All they need to do before purchasing insurance is take a few minutes to stop, call their state insurance department, and confirm that a company is legitimate and authorized to sell insurance in their state."
For more information about insurance, consumers can visit www.InsureUonline.org.
About the NAIC
Headquartered in Kansas City, Missouri, the National Association of Insurance Commissioners (NAIC) is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and the five U.S. territories. The NAIC's overriding objective is to assist state insurance regulators in protecting consumers and helping maintain the financial stability of the insurance industry by offering financial, actuarial, legal, computer, research, market conduct and economic expertise. Formed in 1871, the NAIC is the oldest association of state officials. For more than 135 years, state-based insurance supervision has served the needs of consumers, industry and the business of insurance at-large by ensuring hands-on, frontline protection for consumers, while providing insurers the uniform platforms and coordinated systems they need to compete effectively in an ever-changing marketplace. For more information, visit NAIC on the Web at: http://www.naic.org/press_home.htm.
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©2007 National Association of Insurance Commissioners. All rights reserved.