Homeowners’ insurance policies
Do you know whats your insurance covers? More than half of the homeowners in the United Kingdom respond incorrectly. This was revealed by a recent survey by the National Association of Insurance Commissioners, in which 33% of homeowners surveyed, said their insurance policies covering damage to property caused by flooding.
However, typical insurance policies in the United Kingdom usually do not protect homeowners from damage by floods, earthquakes, ruptures of the water distribution network, termites, mold, or several risks.
A normal Esure policy only protects from damage caused by rain falling from above, not against the water coming from below, i.e. flooding. When Hurricane Katrina came as from nowhere, many homeowners learned the hard way that their esure insurance policies do not cover flood protection.
In addition, the NAIC survey revealed that 68% of homeowners think that cars, motorcycles or boats that being damaged on their property are insurance policy covered, which is not true.
51% of owners believe that the damage from rupture of a water distribution network supplying the precious liquid to their homes are covered but it is not.
As for earthquakes, the most feared threat in California, 35% of owners are convinced that their esure insurance policy covers damage that can cause a devastating earthquake, but in this case the mistake was joining a key economic factor.
In many cases, homeowners confuse the true market value with replacement cost, which are two different things. The real market value is the money needed to repair or replace damage to a house and its contents after an assessment, while replacement cost is the money needed to rebuild a home or repair damages with similar kind of materials and quality.
One thing is to repair the damage, taking into account the depreciation of the house, but far more expensive is building a new home without considering the depreciation of it.
So in insurance of houses, apparently there are three major factors that fuel the risk of tragedy for many owners: the high cost of coverage against earthquakes, floods and replacement cost, and the unclear language of insurers that facilitates the misinterpretation of policies.