7 Items Your Auto, Home Policies Don't Cover


What exactly does your homeowners or auto insurance policy cover? The time to find out is before the disaster. Now is a good time to take a closer look at your policies and to ask questions of your agent.

Odds are you're making at least one wrong -- and costly -- assumption about your coverage. According to a recent survey conducted for Zogby International for MetLife Auto & Home, almost half of those surveyed about their insurance coverage had far more exposure than they thought. Here are some classics:

Auto Coverage

Only 40% of those polled knew that it is possible to owe more on a vehicle than it was actually worth at the time of the accident. And 47% thought that if a new car were totalled only a few weeks after it was purchased, the insurance company would replace it. Wrong. The minute you drive the car off the dealer's lot, it is a used car. The depreciation is huge, and your insurance coverage is for the depreciated value.

Here's a wrong assumption that cost me a lot of money. I assumed -- along with 55% of those surveyed -- that if you use your "gold card" to rent a car, that your card benefits, or your own auto insurance, would provide adequate coverage. But I learned the hard way that insurance policies do not reimburse the rental company for the loss in rental income while the car is being repaired.

The MetLife survey points out another common misconception: If the rental car has to be towed or stored, your own auto insurance probably won't cover those expenses, either.

Here's another potential surprise: If you have a hybrid car with expensive batteries, those probably aren't covered for full replacement cost if they're stolen.

Homeowner's Insurance

The Hurricane Katrina disaster should have awakened everyone to the fact that coverage for flood damage is specifically excluded in almost every homeowner's insurance policy. Instead, you must buy separate protection through the national flood insurance program, which is underwritten by the government. Your agent can sell it to you, and you can learn more at www.floodsmart.gov. But currently only 4.5 million people hold flood insurance under the federal plan.

Also, most standard homeowner's policies exclude water damage that comes from the backup of sewer water or drains or the failure of a sump pump -- something that 64% of those surveyed incorrectly thought was covered. Separate sewer damage coverage can be purchased. Be sure to ask your agent about your coverage and limits in case of a basement flood -- for appliances and furniture as well as the costs of cleanup.

The survey revealed that 71% of Americans with home insurance thought their insurance carrier would pay for the full cost to rebuild from a natural disaster or fire, and a similar number figured they'd be reimbursed for the full cost to replace personal belongings.

But that's not necessarily the case. First, you must have "replacement cost" insurance for your property. And then you must check to make sure that there isn't a "cap" on the total payout. Be sure to document the quality of your furnishings, wall-coverings, carpet and so on by video-taping your home and storing the video, and any receipts, off premises.

A significant part of your rising home value is the cost of the land, which won't be destroyed in a fire. So you specifically need to update coverage for the replacement cost of the building, furniture and personal property.

For items of specific large value, such as jewelry, artwork, furs and silverware, you need a special "scheduled" coverage to make sure they will be covered for their full value in case of theft or fire.

Don't wait to be surprised by what is -- and isn't -- covered in your insurance policies. Ask questions now, and while you're at it, seek quotes from other carriers. You may get more coverage for less money. You'll certainly have more peace of mind. And that's the Savage Truth.


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