Consumer Action insurance poll highlights downsides to filing a claim

Widespread misunderstanding of rental car insurance also found

More than two-thirds of respondents had their homeowner’s insurance premiums increased after they filed a claim, according to an online insurance poll released today. One in five respondents said that the insurance company did not renew the policy after a claim was filed. “This is one of the most unfair aspects of the insurance industry,” said Linda Sherry of Consumer Action. “You pay for protection—sometimes for years—and once you need it, they drop you like a hot potato.” Sherry noted that often it is a real scramble for people to replace coverage, and in most cases, may end up paying much more for new (and sometimes less) coverage because of their claims history. The poll of 800-plus people, conducted by Consumer Action from Sept. 17 through Oct. 9., was designed to learn about what types of coverage is carried by households and to gauge consumer knowledge on the particulars of various types of insurance. Overall, the survey found that consumers appear to recognize the benefits of being insured and the value of paying premiums to ensure this protection. The poll also displayed that surveyed consumers have a good knowledge of the ins-and-outs of insurance. However, widespread confusion exists about what is covered by credit card rental car insurance. The survey was taken by 828 people. Of those, 96.5% (799) have auto policies, 75.1% (622) have homeowner’s insurance, 64.9% (537) have life insurance and 9.2% (76) have renter’s coverage.

Auto insurance

The U.S. is a nation of drivers, so it was no surprise that 799 out of the 828 respondents had auto insurance. Of the 576 people who had filed an auto insurance claim, a whopping 92% said that their premium had been increased following the claim. More than 10% said that their policy was not renewed following a claim. Most people (41%) insured two cars in their households, while 31% insured one. The majority paid between $1,001 and $1,500 per year for auto coverage, while 26% paid less than $1,000.

Consumer knowledge

Respondents were very well informed about most insurance issues in the survey, however credit card rental car insurance emerged as a widely misunderstood topic. Many credit cards provide “collision damage waiver” or CDW coverage when the card is used to rent a car. Consumer Action’s survey highlights that many people incorrectly believe that the rental car insurance offered by credit cards protects them from liability for their actions while driving a rental car. The survey offered five multiple-choice answers to the question “Credit card rental car insurance covers which of the following occurrences?” Four of the six answers were incorrect (see below). Respondents were allowed to choose multiple answers. At least one correct answer was chosen by half of the respondents. Many respondents chose these incorrect answers:
  • Property damage caused by you while driving the car (30%)
  • Medical coverage for a bicyclist you hit while driving the rental car (12%)
  • None of these (14%)
  • All of these (49%)

Homeowner’s insurance

Of those with homeowner’s insurance, 39% pay annual premiums of “less than $1,000” and 17.2% paid between $1,001-$1,500. About a third (32.2%) of homeowners said they had filed a claim—and 14.5% said the claim was denied. Homeowner’s insurance premiums increased for 70% of those surveyed, after they filed the claim. 20% said that the insurance company did not renew the policy after they filed a claim.

FDIC insurance, etc.

Most respondents knew the limits on Federal Deposit Insurance Corporation deposit insurance. More than three-quarters correctly identified $100,000 as the coverage limit on individual accounts. (The temporary measure to increase the limit to $250,000 occurred the week the survey was closed.) However, it is troubling that 16% said they did not know the limit. When asked to name which of several factors does not affect auto insurance premiums, the majority at 65% correctly chose “vehicle fuel efficiency.” However, 19% said they did not know, and 8% incorrectly answered that credit history had nothing to do with auto insurance premiums. Again, the majority at 60% knew that it is the person (or persons) who signed the lease on a rental dwelling that can be held liable if a guest is injured on the premises. This question stumped a quarter of respondents, who answered, “I don’t know.” Sixty one percent knew that floods are not covered by a homeowner’s policy. (The federal government sells separate flood insurance policies to homeowners who live in flood zones.) Given the potential for flooding in many parts of the country, it is disconcerting that 40% did not know this.

Renters insurance

While the number of people surveyed who have rental insurance was small, 84% of respondents said they paid $400 or less per year for the coverage. More than a third paid an annual premium of less than $200. Many tenants assume that the landlord’s insurance would pay them in the event of personal liability or a disaster—not true. Linda Sherry of Consumer Action pointed out that renter’s insurance is an affordable protection. “Above all, you are protected from liability should a guest be injured in your unit.” Similar policies also are available to owners of condos or cooperative units. “Electronics, clothing and furniture can be very costly to replace in case of burglary, fire damage or a broken water pipe upstairs,” said Sherry. “A renter’s policy is really worth its weight in gold.” Sherry noted that it is wise to consider a replacement policy that reimburses you for the actual price you pay to replace the property, instead of the item’s depreciated value.

About the survey

Consumer Action used Survey Monkey (www.surveymonkey.com) to conduct the survey. The 828 respondents came from 41 states and the District of Columbia. More than 95% identified English as their first language, while 2% chose Spanish and 1% Chinese.
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Consumer Action, founded in 1971, is a non-profit consumer education and advocacy organization headquartered in San Francisco with offices in Los Angeles and Washington, DC.
 
 

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