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4/1/2013 - Four facts that are too important to misinterpret


Homeowners ought to be aware of the difference between rebuilding and real estate values.

April Fools' Day. It's perhaps the only day of the year where it's expected that shenanigans and tomfoolery will played by those who wish to have fun at the expense of others. In fact, according to a poll conducted by survey research firm Lab42, two-thirds of Americans believe that no one is too old to celebrate the day of practical jokes.

Often, one of the most common hoaxes is tricking people into believing they've made some type of mistake. But some facts are far too important to fool around with.

With this in mind, the Insurance Information Institute offers a few helpful hints that will help people avoid some of the most common insurance mistakes.

1. Real estate value vs. rebuilding value. For example, a common blunder that people often make is confusing their homes real estate value with its rebuilding value. In other words, if a homeowner's residence were to lose value, they may be fooled into believing that they should reduce the home's insured value as well. But as the III notes, these two have nothing to do with one another. How much a home is insured for is based on how much it costs to rebuild the home from scratch, not the whims of the real estate marketplace.

2. Flood coverage separate from a homeowners policy. Another all too common oversight is with respect to flood insurance. Many people are under the false impression that the coverage is part of their homeowners policy. Truth be told, flood coverage is separate from a homeowners policy and needs to be specifically requested for it to be included in a homeowners plan. The III also advises individuals to not base their level of risk for a flood on whether their residence is in a flood zone. Approximately one-fourth of all floods occur in regions labeled as low risk.

3. Landlord's insurance doesn't provide for contents. Some people often think that they don't have to buy renters insurance because the landlord is covered. While it's true, the landlord will likely have a plan in place that provides for the physical structure of the unit, that doesn't mean an apartment buildings' contents are protected. A renters policy takes care of this issue, as up to the limit of the policy, the plan provides for tenants' various belongings should they be stolen, lost, damaged or destroyed by a fire.

4. There's more to a policy than price. Insurers today compete for the patronage of customers by offering affordable premiums. But the III notes that this should not be the only criterion upon which a policyholder chooses a carrier. The III says it's also important to look into the insurer's background to get an idea of its quality of service and that the company is financially sound.

April Fools' Day may be all in good fun, but insurance factors like these are far too crucial to joke around with.


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