The Insurance Information Institute (I.I.I.) recently released the results of its 2016 Consumer Insurance Survey in which they interviewed more than 1,000 homeowners in the U.S. The findings provide key insights that can serve agents and brokers in improving consumer understanding regarding home insurance and closing coverage gaps.
While consumers understand the basics of what’s covered under a homeowners insurance policy (fire, theft, medical costs for someone injured on the property), many do not recognize that most flood damage is not covered under standard policies. This is despite public education efforts on the need for flood insurance, particularly in the wake of disasters such as the 2016 flooding in Louisiana and throughout the Midwest. The survey found that 43% of homeowners think standard homeowners insurance covers flood damage caused by heavy rain; 28% think hurricane storm surge flood damage is covered.
The I.I.I. says the confusion of whether flood insurance is covered under a homeowners policy may stem from the fact that some types of water and storm-related damaged is indeed covered. Most home insurance policies, for instance, include coverage for damage by wind-driven rain, burst pipes and water leaking into the house because of a roofline ice dam. This all needs to be thoroughly explained to consumers: what is and isn’t covered when it comes to flood damage.
Earthquake coverage is another area that homeowners are confused about, but not to the same extent as flood protection. According to I.I.I., although earthquakes have caused damage in all 50 states, only 8% of American homeowners purchase separate earthquake coverage or an add-on endorsement to their home insurance policy. Twenty-nine percent (29%) mistakenly believe that a standard home insurance policy covers earthquake damage.
What Other Issues Are Homeowners Fuzzy About?
Although most homeowners know a policy will cover possessions stolen in their home during a burglary, they don’t fully understand they have off-premises coverage as well. For example, they don’t recognize that their possessions are also typically covered when the theft takes place away from the home, such as items stolen from their car or the theft of a child’s laptop from school. Of course, they need know there are also limits on certain high-value possessions such as jewelry and that their deductible will kick in before any payouts are made.
When it comes to liability coverage, most are clear about what is covered. How much liability coverage they should be carrying must be discussed in addition to discussing the need to purchase a personal umbrella policy to extend the liability limits they have under the primary policy.
Emerging risks such as identity theft and peer-to-peer rentals (think Airbnb or HomeAway) also need to be clearly explained to consumers. Some homeowners policies provide coverage for losses and expenses related to identity theft, while other policies need to be endorsed. Homeowners who rent their property or even just a room on a regular basis need to purchase separate business coverage.
The I.I.I. also looked at how homeowners shop today for coverage. Only 44% of policyholders comparison-shop for homeowners insurance before renewal, as compared to 69% of auto policyholders who shop for coverage. When asked how homeowners go about buying coverage, 29% say in person with their insurance agent who goes over pricing; 24% by phone; 17% online; and 53% simply don’t shop.
RPS can assist you in providing homeowners insurance and other key personal lines coverages, including stand-alone earthquake, DIC coverage, or flood and excess flood insurance.