What's up with underinsurance?
Home and business owners whose property is severely damaged or totally destroyed often find themselves far short of the insurance dollars they need to replace what they lost. Underinsured is the word that describes this situation.
A property can be underinsured due to:
- Insurance limits that are too low
- Gaps due to policy exclusions
- High deductibles
When you’re underinsured there is a gap between the actual cost of replacing your destroyed home or business and the payout you receive from your insurer. Underinsurance causes claim settlements to be delayed or derailed into litigation. Underinsurance is one of most challenging obstacles to loss recovery.
What is UP doing so solve this problem?
UP is working hard every day to help solve the underinsurance problem. United Policyholders first saw the underinsurance problem after a 1991 wildfire in Northern California. We've seen it after every disaster since that time. Underinsurance has reared its ugly head in Arizona, California, Colorado, Kansas, New Mexico and Texas after wildfires and in every one of the Gulf Coast states that have been hit by hurricanes in recent years. UP is fighting for underinsured consumers in courts and legislatures. We're educating consumers to get second opinions on dwelling replacement values when insuring their homes and offering strategies to underinsured loss victims.
Underinsurance most often affects disaster victims, but it also affects people who lose structures in isolated incidents and it's economically devastating to people and communities, and patently unfair:
Insurers paint a rosy picture in ads that tout their expertise and honor: "We'll put you back where you belong" They label their products "Deluxe Home Replacement Policy." At the point of sale, they invite trust. They ask a few questions about the property. They run some numbers. They issue the policy and cash the premium checks. But when policyholders come up short, suddenly its not their problem. And the laws in every state allow them to pass the buck and say "hey, it's your property, your problem."
With regard to responsibility for setting adequate insurance limits, LAW DOES NOT REFLECT REALITY. Reality is, insurers do the math and set policy limits. Reality is insurers know what it costs to repair and rebuild homes - that's the business they're in. Our laws need to change, and UP is working toward that goal.
The following links will lead you to resources to help you avoid being underinsured in the first place or solve the problem if you suffer a loss and find yourself underinsured.
Pre-loss Buying Tips
- Buying Tips
- Avoiding Underinsurance
- Determining the Right Coverage
- "Enough" Insurance is Often Not Enough
Post-loss Claim Tips
- Underinsurance 101
- Survivors Speak: Coping with Underinsurance
- Basic Tips for the Underinsured
- Causes and Solutions
- FAQs for Disaster Survivors
- After Fires, Homeowners Feel an Insurance Pinch
Laws and Lawsuit Information
Underinsurance generally involves legal issues:
- UP's amicus briefs on California's Underinsurance Regulations
- In Missouri, Insurance Agents Owe Policyholders a Duty of Reasonable Skill
- Why “Everett v. State Farm” was not new law in California
- Court Document re: Underinsurance
- Broker Responsibility Extends Beyond Procuring Coverage
- Liability of Insurance Agents and Brokers for Under-insuring Homes
- Underinsurance Law and Remedies
- Agent Liability Limited by Indiana Court, Expanded in New York
Statistics on Underinsurance
- Roadmap to Recovery Surveys
- Make sure your coverage stands up to the worst-case senario
- California wildfires highlight need to protect homes against underinsurance
- Article on Improving on Home Appraisals