On this blog, we often try to educate homeowners so they can be protected. In the past, we have urged homeowners to read their homeowner insurance policies and to ask questions if there are terms or provisions they do not understand. Well, here is another important tip: Obtain a copy of your policy from your insurance company at least once a year. Why? It is the best way to confirm that you have valid insurance coverage.
Just recently, the California Department of Insurance put out a news release exposing an insurance agent for selling bogus insurance policies to homeowners putting them at great risk.1 This agent, who was arrested and will be prosecuted, "violated his fiduciary responsibility by allegedly ripping off customers for his personal gain," according to Insurance Commissioner Dave Jones. He allegedly collected premiums from homeowners but never placed them in policies with insurance companies. This apparently went on for years. The agent was able to pull off this scam by issuing fraudulent certificates of insurance including falsified policy numbers, coverage period, and policy limits. Unsuspecting homeowners thought these certificates served as valid proof they were insured. However, a "certificate of insurance is not sufficient proof that a policy is in force."2
The vast majority of insurance agents conduct themselves honestly and procure the proper insurance policies for their clients. But, as they say, there is always "one bad apple." To help consumers avoid insurance premium fraud, the Department of Insurance offers the following tips:
"Always check the license status of the agent/broker before you purchase insurance by visiting our Website at www.insurance.ca.gov.
Confirm the validity of your policy with the insurance company, not the broker or agent.
Be aware that claims are paid from the insurance company and not the agent.
Pay your insurance premium by check. Make checks payable to the insurance company not the agent or the agency. Obtain a receipt.
Never pay your insurance premium in cash. Think twice if the agent/broker insists on cash payment.
Obtain copies of the documents relating to your insurance transaction.
If you believe you are the victim of a dishonest insurance agent, call the Department of Insurance at 800-927-4357.3
So, if you are a homeowner or a property owner and do not have a copy of your insurance policy, please obtain a copy of your policy. It’s better to be safe than sorry. If all you have is a single piece of paper–a "certificate of insurance"–which purports to state you are insured, that may not be worth the paper it is written on.
1 Calif. Dept. of Insurance news release: Homeowners in high fire risk areas sold bogus insurance policies, July 3, 2014. Last viewed on July 29, 2014, at http://www.insurance.ca.gov/0400-news/0100-press-releases/2014/release065-14.cfm.