Melissa Gannon
"Consumers and insurers both shoulder some of the responsibility for this problem," says McCarty. "People don't read their policy, because it is a very complex document with endorsements that often contradict the wording in the policy."
McCarty explains that insurers are hesitant to change any wording in their policies because it has stood up to years of heavy litigation, and any change could have legal and financial ramifications for the provider. Flood coverage is provided exclusively by the National Flood Insurance Program and must be purchased separately from your standard homeowners policy, either through a private insurer or directly from the NFIP, which is run by the Federal Emergency Management Agency, or FEMA. In addition, consumers must purchase separate policies to cover earthquakes or damage from mold. Likewise, you can purchase an endorsement, or rider (add-on coverage to your standard policy), for water back up to cover losses from breaks in your water line. The entire U.S. is a flood zone, according to the NFIP. It's just a matter of the level of flood risk you face in your particular area. To find out more about the risk level of your flood zone, you can check the NFIP's Web page on flood zones. The Florida Office of Insurance Regulation developed a checklist for consumers to use when purchasing a new policy. This list is now required by Florida law to accompany a new or renewed policy and it must be gone over by the agent with the policyholder. The check list is being reviewed by the NAIC for use nationwide. Among other findings of the NAIC survey: 68% of respondents mistakenly thought their homeowner's insurance covered theft or damage to their autos or boats; 35% believed that they were insured against earthquake damage and 31% thought they were protected from termites and other insect home-wreckers. "Many homeowners could be seriously harmed financially by misunderstandings about their insurance," according to Walter Bell, NAIC President and Alabama Insurance Commissioner. "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 bottom line is that consumers should develop relationships with their agents who can make sure that their insurance needs are met.| My Homeowners Insurance Doesn't Cover What? | |
| Damage Not Covered | % of People Who Think They Are Covered |
| Flood damage | 33% |
| Cars, boats, and motorcycles stolen or damaged | 68% |
| Break in the water line on your property supplying water to your home | 51% |
| Break in sewer line on your property that connects to the municipal sewer system | 37% |
| Earthquake | 35% |
| Mold | 34% |
| Termites or Other Infestations | 31% |
| Stolen or Injured Pets | 22% |
| Source: Survey "What Isn't Covered By Your Homeowners Insurance?" from The National Association of Insurance Commissioners. | |
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