Survey finds homeowners have badly mistaken beliefs about coverage

This doesn’t surprise me much.  The National Association of Insurance Commissioners did a survey of homeowner beliefs about what their policies cover, and found huge percentages have mistaken ideas.  Here’s one example from the NAIC report:

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.

Here are some other findings:

  • 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.
  • Actually, I’m surprised these percentages aren’t higher.  If you would have asked me what my homeowners policy covered before I went to law school and became an insurance lawyer, I probably would have said all of the above, and then some.  I doubt that I ever really read an insurance policy before I started doing coverage work, and I’ll bet that puts me in the company of many, many Americans. 

    5 Comments

    Filed under First Party Insurance

    5 Responses to Survey finds homeowners have badly mistaken beliefs about coverage

    1. John F. Johnson

      Regarding the break in a water line providing water to an insured premises, my past research has always led me to believe that such a break is covered provided (a) the break occurs after the water is metered and flowing from the water meter to the dwelling as such water services the premises, and (b)the break is caused by a named peril policy if the policy is not a form HO-3. My recollection is that the Louisiana Supreme Court decided this issue long ago and that decision may have been favorably cited in different appellant jurisdictions.

    2. Anti-concurrent language in policies is designed to prevent this from being covered, but not all courts enforce anti-concurrent language, such as courts in Washington and California. You very well may be correct in individual states and individual courts, some courts would use an efficient proximate cause theory or even a reasonable expectations of the insured theory to find coverage in this circumstance.

    3. News Flash: Study shows insureds don’t understand their homeowner’s insurance policies! Duh! Many lawyersk, judges, and court decisions confirm that point every day.

      Co-posted at the Kentucky Injury Law Blog: Here is a post from Insurance Coverage Law Blog that tells us something we don’t already know, but noone is going to do anything about it – folks don’t read or understand their insurance policies! However, the…

    4. News Flash: Study shows insureds don’t understand their homeowner’s insurance policies! Duh! Many lawyers, judges, and court decisions confirm that point every day.

      Co-posted at the Kentucky Injury Law Blog: Here is a post from Insurance Coverage Law Blog that tells us something we don’t already know, but noone is going to do anything about it – folks don’t read or understand their insurance policies! However, the…

    5. Jim Ballard

      I am a semi retired independent insurance adjuster who has handled property and casualty claims for twenty-nine years. I have recently discovered your blog and enjoy reading your material. I have just read David Rossmiller’s comments dated 6/7/07 with interest.
      Generally, I do take the insurance industry side in most disputes such as the Renfroe vs. Rigsby case, the wind vs. flood issue on Katrina, and in the dealings with Hood & Scruggs.
      A recent add campaign by State Farm has caught my attention. They have a television add where a young man is entertaining his significant other at his apartment by having prepared dinner. He pulls out a diamond engagement ring and is about to propose when he drops it down the sink. The girlfriend walks into the kitchen and is complimenting the man on his cooking abilities when she sees him attempting to retrieve the ring. She assumes that the sink is clogged “again”, turns on the garbage disposal, and the audience is left with the sounds of grinding stone & metal. The symbol/icon “nowwhat.com” is flashed on the screen.
      The typical viewer has no idea what the add is about. Like myself out of curiosity, the viewer logs on to the website to find it is a State Farm advertizement for renters insurance.
      The fallacy with the above described nowwhat.com is that under the standard homeowners policy, the circumstances under which the diamond engagement ring is lost are not covered. Most policies on personal property are named peril and what happened in that commercial is not a covered peril. Of course the loss would be covered if the ring was scheduled with an all risk coverage floater.
      My point is that consumers seem to have a misconception about what losses are covered because the insurance industry sometimes uses deceptive advertizing. In competing for business with other carriers, it seems some insurance carriers try to convey a false impression that their policy would cover a loss that their competitors’ policies would deny.
      On auto policies, I suppose it is an intent to inject humor when a competing claim representative tells his policyholder that his vehicle destroyed by a fallen tree during a wind storm is only covered when it involves a ficus tree. Century 21 tries to convey that they came up with a novelty idea that an insured vehicle is covered when the policyholder allows another party to drive it. Farmers seems to say they are unique by providing additional living expense coverage.
      Basically, the insurance industry uses consumer ignorance to sell their policies and elects to educate them when there is a claim.