Homeowners urged to gain better understanding of policy

By Deborah Adamson
Advertiser Staff Writer

Heavy rains and strong winds have pried some tiles off your well-worn roof, causing a leak that drenched your living room. But you're not sure if the full cost of repairs would be covered under your homeowners policy.

You're not alone. Only a third of Americans say they understand the details of their insurance policies "very well" even though 72 percent feel they have the right amount of coverage, according to a survey by the National Association of Insurance Commissioners.

In Hawai'i, the biggest consumer complaint against insurers is the denial of coverage, followed by slow payment of claims, said Insurance Commissioner J.P. Schmidt.

"Read your policy very carefully and ask questions," he said. "Pick a good insurance agent."

Understanding what your policy covers is critical. If strong gusts had damaged your well-maintained roof, your insurer would probably cover the cost of repairs, said Alison Powers, executive director of the Hawaii Insurers Council, a property and casualty insurance trade group. But if you have let your roof go into disrepair, damages exacerbated by the foul weather might not be covered since it's your responsibility to do routine maintenance, she said.

Complicating the situation is the possibility your rates might rise if you file a claim. That's because insurers determine your level of riskiness based on your history of claims. The more claims you file, the higher is the perceived risk of covering you. Thus, your premiums rise.

"Even if it seems intrinsically unfair, but what happened is your risk profile has changed," Powers said.

Consumers can fight back by understanding their coverage better, shopping around for the best deals, actively seeking to qualify for discounts and, if necessary, file a complaint with the state. Here are some tips from industry experts.

• If you want to minimize the probability your insurer would raise your rates, avoid filing small claims that you can easily pay out-of-pocket, according to Weiss Ratings, a financial services ratings and analysis company. If your rates go up anyway, shop around for another insurer.

• Avoid damages in the first place. Protect your property during heavy storms by keeping your trees trimmed, putting away patio furniture, installing roof tie-downs and other measures.

• Read your homeowners policy carefully, being careful to note what's excluded from coverage. If you have questions, ask your agent or broker.

• Make sure you have adequate insurance coverage for your home. If you've added to or renovated your house, its value probably has gone up. Your old homeowners coverage might not be enough to replace the loss of your home, said Janet Bamford, author of "Smarter Insurance Solutions."

  Some lenders might consider you in default of your mortgage if you're underinsured, Schmidt said.

• On the other hand, you might be overinsured. Let's say you put 20 percent down on a $400,000 house and you owe the bank $320,000. Many people will opt to take out homeowners policies to cover their mortgage. But the mortgage covers both the land and the house, Schmidt said. The homeowners policy only covers the house, garage and other structures on the property — but not the land itself. So if the house is assessed at $250,000 and the land at $150,000, your $320,000 homeowners coverage would be too much, he said.

• To save money on premiums, consider raising your deductible or use the same company for homeowners and auto insurance coverage.

• If you've never filed a claim, ask your insurer whether it offers a "loss-free credit" or discount, Powers said. The credit could apply to either new policies or existing policyholders with a good record. But once you file a claim, you'll lose the discount.

• State law requires insurers to respond to a customer within 15 working days, or three calendar weeks, Schmidt said.

To file a complaint or for more information about insurance, contact the state Insurance Division at 586-2790 or go to www.hawaii.gov/dcca/ins.

Contact Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.