by Ken May
It is not surprising that many people don’t really understand what a homeowner’s insurance policy covers. This is actually a good thing for me in that it keeps my job viable. Here are some numbers and facts that I believe you will find interesting. This information is provided by the Insurance Information Institute based on a survey conducted in May, 2016.
First, the good news; most consumers understand that their policy will provide coverage for damage caused by fire, hail, and wind. Most also know that items stolen from their house are mostly covered (I won’t get into geeky insurance stuff like sub-limits here).
Only 44% of home owners comparison shop for homeowner’s insurance while 69% comparison shop to auto insurance. Many people look at homeowner’s insurance as a fixed cost of owning a home despite the fact that they may be paying more for a policy which has less coverage.
Many people don’t shop their home insurance because it is impounded with their monthly mortgage payment. This means the insurance is paid every year by the mortgage company when it comes due. This can create a dangerous trap! It gives people a false sense of security because years go by without the coverage being reviewed leading to homes that are grossly underinsured.
The most popular method for homeowner’s insurance comparison shopping is by speaking with an agent in person. That’s really good news for us for a couple of reasons. First, we get an opportunity to quote proper amounts of coverage to somebody who is underinsured. Next, we may be able to offer ways for the consumer to be better protected while saving money. Third, we can point out gaps in their insurance coverage that they are not even aware of. And fourth, it sure beats getting insurance advice from Uncle Harry or the lady next door.
43% of home owners believe that damage from heavy rain flooding is covered under their homeowner’s policy. I would hope that the average consumer is starting to realize that they need to purchase a flood insurance policy to cover this. The national average of those that have flood insurance is 10 to 14 percent though I would bet that in California, that number is even lower.
I’m going to gloss over information about tsunami storm surge and hurricane storm surge as they really don’t affect us Californians but did you know that 29% of the people surveyed thought that a standard homeowner’s policy covered earthquake damage? I’d bet that more people in California understand that they need a separate earthquake insurance policy to cover earth movement claims.
Here is one that is relevant for us in California; more than 30% of the people surveyed incorrectly believe that their standard home policy covers sinkholes. Remember the large sinkholes that occurred in La Jolla a few years ago? This is earth movement so it is not covered by a standard homeowner’s policy. The same thing can be said about landslides and mudslides. Mudslides are a particularly nasty problem in California after a series of heavy rainstorms.
I’m a bit surprised that 27% of home owners don’t know that they have additional living expenses coverage which covers special living costs incurred when you are displaced from your home due to an insured loss. Covered costs include additional expenses for temporary housing, hotel bills, restaurant meals, etc. This is not an invitation to start binging as the coverage is for the additional expenses incurred because you were forced out of your home.
The survey stated that 54% of homeowners knew that their standard home policy provides coverage for medical payments for somebody bitten by your dog. This is the reason that during the underwriting process, you need to disclose the type of dog you own and the number of dogs you own. Certain breeds are on the high risk list and may not be covered due to past history of the breed.