Homeowners buy insurance to protect against disaster. But when disaster strikes, your insurer might not live up to your expectations, especially if you have a large claim of $30,000 or more, according to our survey of 9,905 subscribers who filed claims in the last few years.
The greater the damages, the greater the likelihood of disagreement over the dollar amount of damages, our survey found. For claims of less than $30,000, only seven percent of respondents reported disagreements with their insurer over the amount of a claim payment. But when damage was $30,000 or more, 18 percent disagreed with their insurer's assessment of what was due. Twelve percent of those in the higher damage group also reported delays in their insurer's handling of their claim, vs. only four percent of those with losses below $30,000.
Insurers have transferred the risk of damage from severe weather events to policyholders through higher deductibles on claims stemming from hurricanes, wind, and hail. Instead of the typical $250 to $1,000 deductible under standard coverage, you may have to pay 1 to 5 percent of your home's insured value (up to 10 percent in Florida). So if your home is insured for $200,000 and your policy has a 3 percent deductible for hurricanes, you'll have to pay $6,000 out-of-pocket on a storm-related claim. Many insurers have abandoned hurricane-prone areas.
Insurers are also using contract language to avoid paying claims. For example, got hail coverage? Great. But if your roof is more than 10 or 15 years old, hail damage might be excluded. And even if you have a standard homeowner's policy that covers an overflowing bathtub or burst or frozen water pipe plus flood insurance, you're still out of luck if your sump pump can't handle a monster downpour or if the sewer backs up--unless you pay $40 to $50 a year more for a specific endorsement covering that.
Unfortunately, many consumers shop for home insurance once, then forget about it. Home-loss claims are uncommon to begin with, and losses tend to be relatively small. That means consumers don't develop much expertise shopping for this product and rarely get a chance to "test" firsthand how it performs. That's exactly why our ratings are based on our subscribers' claim-filing experience.
You can probably benefit by refreshing your knowledge of the basis, so read on, and be sure to visit our Insurance Center for ways to save money on other types of insurance..
