A significant amount of U.S. consumers are concerned about the impact that inflation and rising costs could have on their homeowners and auto insurance coverage, a recent survey said.
Sixty percent of home and/or auto policyowners said they are worried about being underinsured, according to a survey from VIU by HUB, a digital insurance brokerage platform. Being underinsured means owning a policy that only covers a portion of losses in a claim, often because of exclusions or coverage limits.
Among the survey respondents who made a claim on their insurance policy in the past five years, 40% said they had an event where their policy did not cover their claim as they expected.
"Consumers are right to be concerned about the possibility of coverage gaps, as the economy is changing quickly and many people are unknowingly underinsured," Bryan Davis, EVP and head of VIU, said the company's report. "Education and insight can help alleviate those concerns while the advice of an expert can ensure ideal coverage and protection."
If you are looking for the right auto insurance policy to meet your needs, the Credible marketplace can help you compare different rates and lenders without affecting your credit score.
Consumers could be at risk for big out-of-pocket expenses
Inflation is at a near-record high level and has impacted prices across the U.S. economy. For insurance, it's meant increased costs for replacements and repairs, according to the survey. Policyowners could face higher out-of-pocket costs if their coverage hasn't increased to reflect higher replacement values, the survey said.
Most consumers (91%) said they would be concerned if they found out they did not have enough homeowners and/or auto insurance to cover an event. Additionally, 29% said they worried about going into debt paying to replace or repair their car or home if insurance was not enough to cover a claim.
And these costs can be considerable, according to Angel Conlin, Chief Insurance Officer at Kin Insurance.
"You might insure your home for $300,000, only to find out that rebuilding it after a total loss costs $400,000," Conlin said. "Homeowners who are underinsured may have to pay tens of thousands – maybe even hundreds of thousands of dollars – out of their own pockets."
Comparing multiple insurance companies can help you find the best rate on your home or auto insurance. You can visit Credible to find personalized insurance quotes and choose the best option for you.
Here's how policyholders can avoid underinsurance, expert says
Survey respondents cited a lack of understanding about how to choose the right insurance as one reason they were concerned about having inadequate coverage.
More than 4 in 5 policyowners (81%) said they wanted to learn more about or better understand the features of their homeowners or auto insurance policies, the survey said.
Policyowners should understand the nature of the peril they are insuring against to gauge the risks of a coverage gap, Evan Walker, an attorney who deals with personal injury and property claims, said.
"For example, if the peril is liability…then your personal assets are at risk if you're sued and a judgment is rendered against you," Walker said. "If, however, the peril is water, wind, or fire, then you risk not having enough money to repair the damage done to your property."
The best course of action against the risk of underinsurance is to overinsure, Walker advised.
"I would also consider an umbrella policy," Walker continued. "To me, having too much insurance is better than having too little. From what I've seen, any money saved by obtaining lower limits is a penny-wise, pound-foolish approach. If someone is interested in saving money when it comes to insurance, a better approach may be to set higher deductible limits."
If you're looking for new insurance, you can visit the Credible marketplace to compare different premiums across multiple insurance companies and find the best option for you.
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