Konecki Insurance Blog
Five Insurance Mistakes to Avoid: Don't Risk Being Underinsured
6/16/2011 10:20:00 AM
According to an Insurance Information Institute (I.I.I.) Study on March 7, 2011, nearly half of U.S. homeowners don't know that Insurance covers rebuilding costs, not sales price of their home. Too many Americans believe that the coverage limits of their homeowner’s insurance policy are linked to the market value of their home.
In the I.I.I.'s 2011 Insurance Pulse Survey, conducted by the Opinion Research Corporation, nearly half
(48 percent) of survey respondents came to that mistaken conclusion. "The real estate value of a home,
that is the price you can buy or sell it for, has absolutely nothing to with the amount of insurance needed
to financially protect the homeowner in the event of a fire or other disaster," said Jeanne M. Salvatore,
senior vice president and consumer spokesperson for the I.I.I. "Reducing insurance coverage because the
market value of a home has decreased can result in being dangerously under insured." One out of three
respondents to the Pulse Survey reported that they purchased less homeowners or auto insurance as a way
to save money. A better strategy would be to take a higher deductible, which can substantially reduce
insurance costs. Home and car owners can then put the savings into a purchasing the right amount and type
of insurance for their specific needs, pointed out Salvatore. Another way to save money is to comparison
shop, something that 7 out of 10 Pulse Survey respondents said they utilized as a strategy to save on both
their home and auto insurance needs.
Over the next couple weeks, we will reveal the five biggest auto, home, flood and renter’s insurance mistakes
consumers can make, with suggestions to avert those pitfalls while still saving money:
In the I.I.I.'s 2011 Insurance Pulse Survey, conducted by the Opinion Research Corporation, nearly half
(48 percent) of survey respondents came to that mistaken conclusion. "The real estate value of a home,
that is the price you can buy or sell it for, has absolutely nothing to with the amount of insurance needed
to financially protect the homeowner in the event of a fire or other disaster," said Jeanne M. Salvatore,
senior vice president and consumer spokesperson for the I.I.I. "Reducing insurance coverage because the
market value of a home has decreased can result in being dangerously under insured." One out of three
respondents to the Pulse Survey reported that they purchased less homeowners or auto insurance as a way
to save money. A better strategy would be to take a higher deductible, which can substantially reduce
insurance costs. Home and car owners can then put the savings into a purchasing the right amount and type
of insurance for their specific needs, pointed out Salvatore. Another way to save money is to comparison
shop, something that 7 out of 10 Pulse Survey respondents said they utilized as a strategy to save on both
their home and auto insurance needs.
Over the next couple weeks, we will reveal the five biggest auto, home, flood and renter’s insurance mistakes
consumers can make, with suggestions to avert those pitfalls while still saving money:
Mistake #1. Insuring a home for its real estate value rather than for the cost of rebuilding.
When real estate prices go down, some homeowners may think they can reduce the amount of insurance on their home. But insurance is designed to cover the cost of rebuilding, not the sales price of the home. You should make sure that you have enough coverage to completely rebuild your home and replace your belongings.
A better way to save: Raise your deductible. An increase from $500 to $1,000 could save up to 25 percent on your premium payments.
