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:
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.
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.