INSURANCE SURPRISES: SURVEY FINDS MANY AMERICANS DRAMATICALLY OVERESTIMATE THE LEVEL OF INSURANCE PROTECTION THEY HAVE

INSURANCE SURPRISES: SURVEY FINDS MANY AMERICANS DRAMATICALLY OVERESTIMATE THE LEVEL OF INSURANCE PROTECTION THEY HAVE

Warwick, RI July 10, 2007

Although most Americans are actually willing to pay more for auto and home insurance to achieve greater peace of mind, the overwhelming majority mistakenly believe that their insurance covers them for risks against which many policies do not protect, leaving millions financially vulnerable. 

These are the findings of a new survey on public perceptions of auto and home insurance, conducted by Zogby International for MetLife Auto & Home. When asked whether their current auto and home policy would provide coverage under various situations, many Americans incorrectly assumed that their insurance would take care of the loss, a potentially costly error that could result in significant out-of-pocket expenses.

Among the survey findings:

• Most Americans seriously underestimate how much they might owe if their vehicles were “totaled.” Only 40% of those polled knew that it was possible to owe more on a vehicle than it’s actually worth at the time of accident. Furthermore, 47% responded that if a new vehicle were totaled only a few weeks after being purchased, the insurance would pay for the full cost to replace the vehicle—when in fact, most insurance companies will deduct for depreciation, which could leave consumers owing thousands of dollars on a car loan.
• Although more than half (55%) of Americans don’t purchase insurance for rental vehicles from a rental agency, correctly assuming that their auto insurer would provide coverage, a large majority misunderstood—or didn’t know—what expenses their auto provider would actually cover. Fully three quarters weren’t aware that most insurance policies do not reimburse the rental company for loss in rental income while the car is out of service, nearly half (49%) incorrectly assumed that their carrier would pay for a decrease in the market value of the rental vehicle, and 42% thought that the cost for towing and storage of the vehicle while it was being repaired would be covered. Even though most rental companies will request reimbursement for these charges if there is an accident, the truth is, most insurance policies leave the burden of payment to consumers.
• Almost half of Americans (46%) say that their auto insurance company would pay for the full cost of items such as batteries, tires and shocks, if damaged in an accident. In fact, most standard auto policies deduct for depreciation, paying you today’s value for those used parts. This is especially of concern to owners of hybrid vehicles, since the batteries in their cars cost thousands of dollars, and this coverage gap could leave “green” car owners with a hefty price tag in the event of a loss.
• More than seven out of ten (71%) Americans with home insurance said that their insurance carrier would pay for the full cost to rebuild from a natural disaster or fire, while 72% percent said they would be reimbursed for the full cost to replace personal belongings. However, nearly all insurance companies “cap” the amount they will pay for a total loss, unless additional coverage is purchased, and most policies take depreciation into account when assessing damage to personal belongings.
• Almost seven out of ten (69%) Americans expected that their home insurance would pay, in the event of a loss, for upgrades to the property necessitated by building code ordinances, such as upgraded wiring. In fact, the standard insurance policy does not cover these upgrades, possibly leaving many homeowners in a financial bind that must be resolved before the repair work can begin.
• More than six out of ten (64%) thought that their home insurance would provide coverage for water damage resulting from the back-up of water from sewer, sump pump, or drains. In fact, most standard homeowners policies exclude this type of damage, although sewer back up coverage can be purchased through a separate endorsement.
• The survey also revealed that many Americans don’t clearly understand what the standard auto or home policy actually does cover. For example, more than one-third of those questioned didn’t know that their home policy covered them from lightning damage, although it’s covered by almost all policies.

Avoiding Insurance Surprises is Surprisingly Easy
Despite this lack of understanding, consumers can avoid insurance gaps for many common losses; often for a premium that is equal to, or less than, the one they are currently paying. The key is to review their policies and then talk to their insurance agents or representatives about any coverage gaps that they identify.

“Consumers don’t necessarily need—or want—to know every fine detail of their insurance policy, but they should feel confident that they’re actually receiving the coverage they deserve. It always makes sense to ask questions and to shop around for the best value,” said Bill Moore, president of MetLife Auto & Home. “Shopping on price alone can be ‘penny wise, pound foolish,’ because while you may save money up-front, you can end up paying more in the end. The simplest solution—and the best value for your money—is to have the coverage you need automatically built into your policy. There’s a lot of competition in the marketplace, and you can find a product that's right for you, with a little homework.”

For more information about auto and home insurance, visit www.metlife.com.

The Zogby/MetLife Auto & Home insurance survey sample consisted of 1,204 adults who own auto insurance, and 1,203 adults who own homeowners or renters insurance, and living in a household with a telephone. The interviewing was conducted February 19-28, 2007.

Zogby International is a public opinion, research, and business solutions firm with experience working in 65 countries around the globe. Founded and led by John Zogby since 1984, Zogby International ranks as one of the industry's leaders thanks to its reputation for superior accuracy and reliability. Zogby specializes in telephone, Internet, and face-to-face survey research and analysis for political, corporate, non-profit, and governmental clients. The firm is headquartered in Utica, New York, with offices in Washington D.C. and Dubai, United Arab Emirates.