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Survey: Americans Unprepared for Disaster

Advance planning can cut recovery time

May 13, 2008

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As the nation braces for the hurricanes, wildfires, tornadoes and floods that accompany the spring and summer disaster season, a new survey shows that nearly half of U.S. consumers are insufficiently prepared - in terms of their insurance coverage - to deal with potential losses.

The survey by the National Association of Insurance Commissioners (NAIC) revealed a significant lack of preparedness among consumers in documenting their belongings.

Nearly half - 48 percent - said they did not have an inventory of their possessions. Of those consumers who reported having a checklist, 32 percent had not taken any pictures and 58 percent had no receipts validating the cost of their possessions. In addition, 44 percent of respondents acknowledged that they had not stored their inventory in a remote location.

California Insurance Commissioner Steve Poizner says that's a mistake.

"A comprehensive list of your belongings and their value will help you file an insurance claim after a disaster. Creating an inventory and storing it in a safe location away from home is one of the most basic - and most effective - disaster preparedness steps anyone can take to help protect themselves and their financial future," Poizner said.

The survey also found that 43 percent of adults polled owned homeowners or renter's insurance policies that provided a replacement cost payout. Of the remaining consumers, 27 percent indicated their policies insured their homes for the actual cash value, while another 28 percent did not know which type of coverage they purchased.

Actual cash value is the amount it would take to repair or replace damage to a home and its contents after depreciation. Replacement cost is the amount it would take to replace or rebuild a home or repair damages with materials of similar kind and quality, without deducting for depreciation.

"Many consumers are not able to recover after a disaster because they don't realize how depreciation can impact their assets," said Poizner. "It is important that consumers understand the implications of purchasing an actual cash value policy vs. replacement cost insurance. In the event of a disaster, the difference could mean thousands of dollars in payout."

The NAIC survey also found that the majority of American consumers do not have the coverage necessary to protect themselves from specific types of losses that are not reimbursed under standard policies:

• 69 percent do not have earthquake insurance.
• 65 percent do not have flood insurance.
• 56 percent do not have insurance for a water line break.
• 55 percent do not have insurance for a sewer line break.

Recovery tips

Commissioner Poizner's disaster preparedness tips for homeowners and renters:

• Take an inventory of your valuables and belongings. Take photographs or a video of each room. This documentation will provide your insurance company with proof of your belongings and help to process claims more quickly in the event of disaster.

• Keep sales receipts and/or canceled checks. Also note the model and serial numbers of the items in your home inventory.

• As you acquire more valuables - jewelry, family heirlooms, antiques, art -consider purchasing an additional "floater" or "rider" to your policy to cover these special items. These types of items typically are not covered by a basic homeowners or renter's insurance policy.

• Remember to include in your home inventory those items you rarely use (e.g., holiday decorations, sports equipment, tools, etc.).

• Store copies of all your insurance policies in a safe location away from your home that is easily accessible in case of disaster. You may want to store your policies and inventory in a waterproof, fireproof box or in a safe, remote location such as a bank safe deposit box. Consider leaving a copy of your inventory with relatives, friends or your insurance provider and store digital pictures in your e-mail or on a website for easy retrieval.

• Know what is and is not covered by your insurance policy. You might need additional protection depending on where you live. Make sure your policies are up to date. Contact your insurance provider annually to review and update your insurance policy.

• Keep a readily available list of 24-hour contact information for each of your insurance providers.

• Find out if your possessions are insured for the actual cash value or the replacement cost. Actual cash value is the amount it would take to repair or replace damage to your home or possessions after depreciation while replacement cost is the amount it would take to repair or replace your home or possessions without deducting for depreciation. Speak with your insurance provider to determine whether purchasing replacement coverage is worth the cost.

• Speak with your insurance provider to find out if your policy covers additional living expenses for a temporary residence if you are unable to live in your home due to damage from a disaster.

• Appraise your home periodically to make sure your insurance policy reflects home improvements or renovations. Contact your insurance provider to update your policy accordingly.

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