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Senior Citizen Alerts
Many Senior Citizens May Not Know What Is NOT
Covered by Homeowners Insurance
Survey shows lack of awareness among consumers when
it comes to their homeowners policies
June 13, 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 are
available from the federal government’s 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 NFIP.”
The NAIC survey also revealed other homeowner
misunderstandings when it comes to common loss situations — none of
which are covered by standard homeowners insurance 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 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.
Insurance Tips for Homeowners from the NAIC’s
Insure U Web Site
● Add insurance coverage as you enhance the value
of your home and acquire expensive possessions, such as furniture,
computers, stereos and televisions.
● Alert your insurance company when making any
major home improvements — usually anything more than $5,000. Also,
update your homeowners insurance policy to reflect the new enhancements
and prevent being underinsured.
● In maintaining your residence, realize that you
are liable for things that happen on your premises. Keep in mind that in
many states you could be held legally responsible for the actions of
anyone who drinks in your home and then has an accident in your house or
after leaving it. Your policy should protect you against lawsuits due to
these types of liability issues.
● Backyard items, such as a trampoline or pool,
may require you to increase your liability coverage through an umbrella
policy that protects you in the event that someone is injured while on
your property.
● As you acquire more valuables — jewelry, family
heirlooms, antiques, art —consider purchasing an additional “floater” or
“rider” to your policy to cover these special items. They’re typically
not covered by a basic homeowners or renters policy.
● It’s a good idea to make an inventory of all of
your personal property, along with a photograph or video of each room.
Also, save your receipts for major items and keep them in a safe place
away from your house or apartment. That will make it easier if you ever
need to file a claim.
“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 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 before purchasing
insurance.”
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).
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.
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