Homeowners Insurance


Earthquake resilience was in the spotlight as the Obama administration gave its support for an earthquake-alert system on the West Coast at a White House summit Tuesday.

President Obama also signed an executive order establishing a federal earthquake risk management standard which will improve the capability of federal buildings to function after a quake.

The order requires federal agencies to ensure that federal buildings are constructed or altered using earthquake-resistant design provisions in the most current building codes.

A 2015 scientific assessment from the U.S. Geological Survey shows that more than 143 million Americans could experience potentially damaging earthquakes, nearly double the prior 2006 estimate.

The ShakeAlert early warning system being developed and tested in the West would warn residents and businesses from at least a few seconds to a few minutes before the shaking starts.

This would be enough time to slow and stop trains and taxiing planes, and to prevent cars from entering bridges and tunnels, for example.

A common misperception among Americans is that earthquake coverage is provided in a homeowners or business insurance policy.

However, standard homeowners, renters and business insurance policies do not cover earthquake damage. Coverage is available either in the form of an endorsement or as a separate policy.

Residential earthquake insurance in California is sold through the California Earthquake Authority, a privately funded, publicly managed organization.

Some 85 percent of U.S. homeowners said they do not have coverage for earthquake damage in response to the Insurance Information Institute’s (I.I.I.) annual Pulse Survey.

The I.I.I. Pulse results showed significant variations in the number of consumers that have earthquake insurance across the U.S.

That number was greatest in the earthquake- prone West, where 18 percent of homeowners said they had purchased separate earthquake insurance coverage.

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Information on reducing earthquake damage to homes and businesses is available on the Insurance Institute for Business and Home Safety (IBHS) website.

The I.I.I. also offers facts and statistics on earthquakes and tsunamis here.

The Insurance Information Institute (I.I.I.) gets questions all the time. Here is one answered by chief actuary James Lynch:

Q: On your web page, you report an ORC International poll for the I.I.I. found that 95 percent of homeowners had homeowners insurance. How many homes does that represent?

A: The short answer is about 70 million. And as is so often the case, I took a long route to it.

The 95 percent is the percentage of people who said they own a home and then answered “yes” to the question of whether they have homeowners insurance. We regularly survey about 1,000 people on this topic, and around 94 percent to 96 percent generally answer yes.

In the poll, we do not define what a home is, so it could be single-family home, a condo, a co-op, a duplex or anything else. In addition, there are several different types of homeowner policies, but the survey doesn’t ask which type they have. The I.I.I. designed the survey, and we doubt the typical consumer knows off the top of his head whether they bought, say, a dwelling fire policy or an HO-3, so we don’t ask. The answers would not be meaningful.

The National Association of Insurance Commissioners (NAIC) collects information on all types of homeowners policies. To muddle things a bit, one of those “homeowners” policies is really renters insurance.  In 2012, the most recent year available, there were 68.6 million policies for the various types of homeowners policies or their barebones brethren, dwelling fire (not counting the renters insurance I just mentioned).

As a reasonableness check (and because I felt like it), I created a separate estimate by using U.S. Census data from the American Community Survey (factfinder.census.gov). The table is C-01-AH, if you want to look it up yourself.

According to that source, there were 75.65 million owner-occupied year-round housing units in 2013, both single- and multi-family. (There are another 4.07 million seasonally occupied homes.).

Multiplying the 75.65 by the 95 percent with insurance leaves us with an estimate of about 72 million homeowners policies covering primary residences.

Comparing the estimates: they measure two different years, 2012 and 2013 but that discrepancy isn’t critical. The number of households doesn’t vary too much from year to year. More significant: the latter estimate is indirect; it smashes together numbers from two sources (Census Bureau and I.I.I. poll). So it is probably less accurate than using the NAIC data, even though the NAIC data is older. However I find it reassuring they came to approximately the same number. That’s why 70 million seems a reasonable estimate.

Q: Thank you for your quick response. I appreciate the background/explanation. I was actually trying to determine the number of homes that are uninsured (the 5 percent). Based on your calculations below, 5 percent of the 75.65 would be 3.78 million, correct?

A: Your math is correct if you want to estimate primary residences, including condos, etc. Secondary residences would add another 200,000 approximately, being 5 percent of 4.07 million (give or take). Because it is an estimate and a rough one on a (relatively) small number, I’d round it in general terms, such as saying “between 3½ and 4 million homes are uninsured.”

Lots of homeowners facts and statistics at the I.I.I. website.

As we put the finishing touches to our Halloween costumes we’ve rounded up some of the not-so-spooky posts from around the insurance blogosphere to keep the ghouls and ghosts away.

First up is Erie Insurance with its post 4 Lesser-Known Halloween Safety Tips. Read all the way to the end and you’ll learn of the dangers of glow sticks. As a parent to two young children who gravitate towards anything that glows, I appreciate the tip that glow sticks cause an increase in poisoning on Halloween. Make sure to tell your kids to keep them away from their mouths.

Next up is Zillow and HomeInsurance.com with an excellent post on how Halloween carries potential financial risk for homeowners. Whether it’s Halloween-related fires leading to property damage or liability claims from trick-or-treaters injured on your property, some practical safety steps and a homeowners or renters insurance policy can help protect your most valuable assets.

Do you have a secure place to park your car? In this Insurance Institute for Highway Safety (IIHS) post (from 2013) we learn that vehicle vandalism peaks on Halloween with nearly twice as many insurance claims on October 31 as on an average day. Such claims include things like slashed tires and smashed windows. Hence the importance of comprehensive auto insurance coverage.

And for the insurance fans among you, last but not least is a post on WillisWire, reflecting not on make-believe monsters, but on the scariest real risks faced by their clients during the year. Which one keeps you up at night? Have your say and take their poll.

Wishing all our readers a safe and Happy Halloween!

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The number of lightning deaths in the United States in 2015 continues to rise, the National Weather Service (NWS) has warned.

So far this year some 22 lightning fatalities have been recorded, just four shy of the 26 deaths recorded for the whole of 2014.

Alabama, Florida and Colorado top the states for lightning deaths in 2015 to-date with three lightning deaths each.

Lightning kills an average of 49 people in the U.S. each year, and hundreds more are severely injured, according to the NWS.

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While storms can be deadly, the number of insurance claims from lighting strikes in the U.S. has been in a period of steady decline, according to the Insurance Information Institute (I.I.I.).

Total insured losses from lightning were up 9.7 percent in 2014, though overall incurred losses between 2010 and 2014 are still down 28.5 percent.

An analysis of homeowners insurance data by the I.I.I. and State Farm found there were 99,871 insurer-paid lightning claims in 2014, down 13 percent from 2013. Yet the average lightning paid-claim amount was up 26 percent, from $5,869 in 2013 to $7,400 in 2014.

James Lynch, chief actuary at the I.I.I. noted that since 2010, the number of paid lightning claims is down more than 53 percent:

The sustained decline in the number of claims may be attributed to an increased use of lightning protection systems, technological advances, better lightning protection and awareness of lightning safety—as well as to fewer storms.”

Still, lightning remains a very costly weather-related event. Despite fewer storms, insurers still paid $739 million in lightning claims to nearly 100,000 policyholders in 2014, the I.I.I. notes.

The Lightning Protection Institute offers some useful lightning safety tips here.

National Dog Bite Prevention Week is coming up… Here are some numbers to consider:

  • • Dog bites caused more than 33 percent of all homeowners insurance liability claims in 2014, costing in excess of $530 million
  • • The average cost per claim has increased more than 67 percent from 2003 to 2014
  • • The number of dog-bite claims actually decreased by 4.7 percent but the average cost per claim increased 15 percent from $27,862 in 2013 to $32,072 in 2014
  • • California (1,867), Ohio (1,009) and New York (965) had the highest number of claims in 2014
  • • New York had the highest average cost per claim in the country: a whopping $56,628

Costs per claims have risen due to a variety of factors including increased medical costs and jury awards.  In addition to dog bites, some claims are due to dogs knocking down children, cyclists, the elderly, which can result in fractures and other injuries. All these factors impact the potential severity of losses.

Contact @LWorters for more information.

Much hay is being made of an apparent decline in the number of identity theft victims and losses, amid an ongoing number of significant data breaches.

The headlines follow release of the 2015 Identity Fraud Study by Javelin Strategy & Research. The study found that there were 12.7 million identity fraud victims in 2014, down 3 percent from the near record high of 13.1 million victims in 2013.

At the same time, some $16 billion was stolen from fraud victims in 2014, an 11 percent decline from $18 billion in 2013. Javelin attributes the decrease to the combined efforts of industry, consumers and monitoring and protection systems that are catching fraud more quickly.

As we know, 2014 saw a number of major data breaches, notably from retailers Home Depot, Neiman Marcus, Staples and Michael’s as well as financial institutions such as JP Morgan Chase.

But lest you think that the swift response to data breaches has nullified the identity theft threat, think again.

Javelin found that two-thirds of identity fraud victims in 2014 had previously received a data breach notification in the same year. Also, individuals whose credit or debit cards were breached in the past year were nearly three times more likely to be an identity fraud victim.

Meanwhile, identity theft just topped the Federal Trade Commission’s (FTC) national ranking of consumer complaints for the third consecutive year, accounting for 13 percent of all complaints.

Government documents/benefits fraud (39 percent) was the most common form of reported identity theft, followed by credit card fraud (17 percent), phone or utilities fraud (13 percent), and bank fraud (8 percent), the FTC said.

Whether or not identity theft is caused by a data breach (remember, stolen laptops, wallets, dumpster diving, phishing scams are some of the most common causes of identity theft), or whether an individual even knows how their information was compromised (many don’t), it’s important to stay vigilant to this threat.

A 3 percent decline in identity fraud victims in one year isn’t much. As Al Pascual, director of fraud & security at Javelin notes:

Despite the headlines, the occurrence of identity fraud hasn’t changed much over the past year, and it is still a significant problem.”

Wondering if your homeowners insurance policy includes coverage for identity theft? Check out these useful tips from the I.I.I.

Overall satisfaction among homeowners who have filed a property insurance claim increased for the third consecutive year, according to the JD Power 2015 Property Claims Satisfaction Study.

Insurers have been able to increase property claims satisfaction to 851 (on a 1,000 point scale) in 2015, up from 840 in 2014.

JD Power said the higher satisfaction among customers reflected the fact that insurers have applied the lessons learned while handling CAT claims to non-CAT claims and put renewed focus on their property insurance business.

In the words of Jeremy Bowler, senior director of the insurance practice at JD Power:

The study shows the significant gains insurers have made in customer satisfaction by applying the lessons learned while handling prior catastrophic losses to all claim processes.

The big storms masked the steady progress the industry has also been making in recent years on routine claims, but we’re really seeing that shine now.”

The study, now in its eighth year, measures satisfaction with the property claims experience among insurance customers who have filed a claim for damages by examining five factors: settlement; first notice of loss; estimation process; service interaction; and repair process.

Overall satisfaction improved in each of the five factors in 2015, with greatest year-over-year improvements seen in settlement and service interaction, JD Power noted.

The study findings are good news for insurers as they often realize a return on their investment in customer satisfaction in the form of loyalty.

Only 3 percent of customers who were delighted (satisfaction scores 900 or higher) and 7 percent of those who were pleased (scores 750-899) with their insurer during the claims process have switched carriers since their claim closed, according to JD Power.

But, 9 percent of indifferent (scores 550-749) and 11 percent of displeased (scores 549 or lower) customers have switched to a different insurer. And 23 percent of indifferent customers and 42 percent of displeased customers say they will shop for a new provider during the next 12 months.

The study is based on more than 6,100 responses from homeowners insurance customers who filed a property claim between January 2013 and December 2014.

Check out this I.I.I. video for steps for filing a homeowners claim.

The cost of claims paid by homeowners insurers has been increasing at twice the rate of inflation, despite significant declines in recent years, according to the 2015 edition of a report from the Insurance Research Council (IRC).

Average homeowners claims payments per insured home have been increasing at an annualized rate of 5.0 percent since 1997, the IRC said, compared to the inflation average of approximately 2.4 percent.

Volatility—a major characteristic of homeowners insurance claims trends—is reflected in this chart:

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The average claim payment per insured home countrywide rose to $625 in 2011, up from $229 in 1997, before falling to $442 in 2013.

What’s behind the increased costs?

All of the increase in average costs per insured home was due to growth in average claim severity, which rose at an annualized rate of 7.8 percent over the 17-year period—more than triple the rate of inflation, the IRC said.

The rise in claim severity more than offset a 2.6 percent annualized decrease in claim frequency, the report found.

That said, claim frequency trends were found to be significantly more volatile than claim severity trends, especially for experience identified by insurance companies as related to catastrophe events.

In the words of Elizabeth Sprinkel, senior vice president of the IRC:

Insurance companies face significant challenges in responding effectively to rapid growth in claim severity and in managing the extreme volatility of claim trends everywhere.

In addition, consumers will find it increasingly important to consider steps to control their personal exposure to risk and to mitigate the damages and costs associated with severe weather events.”

IRC analyzed data from the Fast Track Monitoring Service representing approximately 50 percent of the U.S. homeowners insurance market for the study.

I.I.I. has useful facts and statistics on homeowners insurance here.

My own Valentine’s story is one of loss and finding, and how insurance helped.

Last April I lost my engagement ring. One minute it was on my finger, the next it wasn’t.

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It was late in the day when I felt the weightlessness of my fourth finger. The day had been full of preschool dropoffs and pickups, a grocery store run, a bank drive-thru, multiple loads of laundry, a music class and playtime with my youngest son.

Frantic, I retraced my steps, searched on my hands and knees every inch of the family room, fingered through laundry fresh and dirty, drove back to the bank, called the grocery store. Nothing.

The knowledge that the ring had become loose on my finger in recent months didn’t help. It could have slipped off anywhere.

My partner arrived home to find me a mess. When we got engaged back in 2004 the diamond rings we picked out at a well-known Fifth Avenue store were a significant purchase for us, but not excessive by any means.

Still, to lose the ring just a year shy of our 10th wedding anniversary gave me that ball in the pit of my stomach feeling. I emailed our insurance agent.

The next morning I broadened my search, retracing steps over the prior weekend. On my second empty-handed trip back from the bank drive-thru I followed our agent’s advice and called our insurer to report the loss.

Retelling what had happened to the customer service rep was cathartic actually. She asked for details: When did I last remember seeing the ring? Which bank drive-thru had I visited? How long had the ring been loose? When exactly had the ring been purchased? Had it been valued?

Luckily, we had filed away the valuation reports and diamond certificate given to us at the time of purchase. On re-reading, these words jumped out:

I have also included two copies of a valuation report which details the replacement value of your merchandise. One copy is provided for your personal records, the other may be supplied to your insurance company to protect you in the event of loss or damage.”

The report filed with our insurer, I was somewhat comforted by the fact that our standard homeowners policy covers our personal belongings, including jewelry up to a stated dollar amount (in our case just more than the value of the ring). Our decision to go for replacement cost coverage also proved prudent.

A day later I got a call from the insurer that the appraisal department had reviewed my case and a check would be issued to make good my loss. I thanked the rep for her efficiency, adding: “I’ll still keep looking for the ring.”

It was four or five days after the ring went missing that a strange thing happened. My eldest son was jumping up and down on the couch. Anyone with young boys knows they do this often.

Suddenly something round and glittering fell out from under it. My son picked it up and handed me none other than my engagement ring!

I don’t know who was more pleased, me or the customer service rep at our insurer. The insurance check (already in the mail) was cancelled. The original ring was back on my finger.

Soon afterwards on the advice of our insurer, we went back to the jeweler to get my ring re-sized. After 10 years, one dog and two kids the net reduction was 1.5 sizes.

Our modest jewelry loss ended in the best possible way, but if you own valuable jewelry or other items that would be difficult to replace, you might want to increase your coverage, as the I.I.I. advises here.

And remember, as the years go by it’s a good idea to get your jewelry resized if you want to hold on to the sentimental value.

With thanks to MetLife and Tiffany & Co.

Happy Valentine’s Day to all our readers!

As you prepare to welcome a throng of Frozen Elsas and Olafs to your front door, you may not be thinking about insurance but we’re here to tell you, you’re covered.

The Insurance Information Institute (I.I.I.) points out that standard homeowners and renters insurance will provide coverage for the following:

Vandalism: In the event your home or your personal possessions are damaged by neighborhood tricksters, homeowners and renters insurance policies provide coverage for vandalism and malicious mischief. You are on your own, however, when it comes to removing the toilet paper from your front yard….

Fire: If a jack-o-lantern, or other decoration, goes up in flames and damages your property, your homeowners or renters policy will cover fire-related losses. And, should the blaze make your home uninhabitable, additional living expenses (ALE) coverage will pay for alternate accommodations, such as a hotel, while your home is being repaired.

Injuries: The liability portion of a homeowners or renters policy comes into play if a Halloween party guest, or a trick-or-treater is injured while at your house or apartment. These policies also include no-fault medical coverage so the injured person can file their claim directly with your insurer. And if Fido gets a little skittish from all the commotion and accidently nips a trick-or-treater your liability coverage includes damages or injuries caused by pets.

Have a safe and happy Halloween!

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