Hurricane Isaias came ashore near Destin on Friday night with sustained winds of 105 mph. As Panhandle business and homeowners begin documenting damage, some will face a second shock. They will learn that what their insurance policy actually says is not close enough to pay for the damage.
A reader responded to my post from this past March about coverage gaps, Did You or Your Business Suffer a Denied Claim? The Real Problem May Have Started Before the Loss, with a criticism I deserved to hear:
You say policyholders should make sure they understand their policy but honestly, that is next to impossible.
The reader compared buying insurance to buying a car from “the glossy brochure without ever seeing the car, sitting in or driving it.” That is a pretty good description of shopping for coverage when the price is easy to find, but the policy language is not.
The reader also described asking an agent for the policy after a house flooded while the owner was 1,200 miles away. The agent sent a glossy marketing piece instead. A brochure is useful when you are shopping. When your house has flooded, you need the contract.
I have urged policyholders to read their policies before a loss, and I still do. But I have spent my career reading insurance policies. I know how much work it can take to assemble the policy, its endorsements, and its renewal changes, then understand how the pieces fit together. Most homeowners will never do that before a hurricane. Many who try will miss a limitation whose importance becomes obvious only after the damage occurs. Telling them simply to “understand their policy” puts too much of the burden on the person least equipped to carry it.
In my earlier post, I wrote: “And somewhere in between lies the question of what was requested, what was promised, and what was delivered.” That question deserves attention after Hurricane Isaias. A denial may mean the insurer has misread the policy. It may mean the policy never contained coverage the homeowner, business owner, or condominium association believed had been purchased. Those are different problems, and the second requires reviewing the agent’s proposal, application, communications, and renewals, as well as the policy itself.
The reader proposed “a universal template like Medicare supplemental insurance” so homeowners could compare basic coverage and choose additional protection knowingly. There is merit to that idea. Medigap plans generally have standardized benefits within each lettered plan, allowing buyers to compare insurers offering the same plan. Homeowners insurance faces different property risks from place to place, but those differences are a reason to explain choices clearly, not to leave buyers guessing about them.
Florida’s Legislature recognized the problem after the 2004 hurricanes, finding that consumers had been inadequately insured in part because property policies were difficult to understand. Florida now requires a coverage checklist and outline with certain residential policies when they are issued and renewed. Yet the law permits those documents to arrive with the issued policy, and the checklist does not change the contract. A homeowner needs a clear explanation while choosing coverage, including what flood protection is available, what deductible applies, and what is changing at renewal.
For those dealing with Hurricane Isaias damage now, report the loss promptly, photograph what happened, and request the complete policy in force on the date of loss, including every endorsement. Keep the proposal, application, renewal notices, emails, and messages about the coverage you asked for. If you receive a denial or an unexpected limitation, examine both the insurer’s reading of the contract and how that contract came to be. Do not assume the first answer settles either question.
Good insurance agents can make an enormous difference. They should be able to put the real policy in a client’s hands and explain its major gaps before a storm puts those explanations to the test. Policyholders should ask. Agents and insurers should answer. Nobody should have to wait until the roof is gone or significantly damaged to find out what was sold.
Thought For The Day
“Agents have a unique opportunity to prove their value to clients by providing consistent and thorough customer communication.”
— Kevin Brandt, Executive Director, Trusted Choice
