|
||||||||
|
|
||||||||
|
|
Show Me the Policy When you have a claim, small or large, in most cases ultimately the most important documents that will pertain to the type of coverage you have for the claim are contained in the basic policy and all endorsements attached to it. An insurance policy is a legal contract that makes specific promises to you as a policyholder in return for a payment of a premium as well as meeting other types of conditions. In California, according the California Department of Insurance 1998 survey, there are 153 Insurance Companies among 87 Licensed Groups of Insurers that sell home insurance to California homeowners. One of the most important facts as a consumer that you need to understand is that in California, there is no standard home insurance policy form or standard endorsements attached to it! If all home insurance policies and endorsements were identical no matter from which insurance company you purchased the coverage, it would greatly simplify things for you as a homeowner when it comes to shopping for home insurance. If this were the case, perhaps the most important factor would simply boil down to price, financial stability and customer service. However, don’t hold your breath. Unless mandated by legislation, the likelihood of there ever being the exact same wording in homeowner policy forms and endorsements by all the insurance companies offering home insurance in California is nil. Having identical policy forms and endorsements would be akin to any industry making only one identical model of a particular product. Imagine if you went to buy a car and no matter if you went to a Chevrolet, Ford, GMC, BMW, Mercedes or any other car dealer every car being sold was identical! In addition, beware of any agent that may tell you that all policies for home insurance in California are basically all the same as the one he or she offers you! Nothing could be further from the truth. As an agency specializing in home insurance, I have tried to put my hands on the policies being sold by my competitors. This way when a potential client calls me and tells me who their current homeowners insurance is with, I would be able to point out important coverage differences between the policy they currently have and those that I can offer. However, obtaining copies of all the various policies sold has proven to be next to impossible. Obtaining A Copy of the Basic Homeowners Insurance Agreement and all Forms and Endorsements that Will be Attached Before you make your final decision to purchase a home insurance policy, in my opinion you should have the opportunity to see and read in its entirety the complete home insurance policy and any forms or endorsements that will be attached to it. Furthermore, once you buy your home insurance policy, you should maintain copies of all the paperwork that is sent to you by your insurance company and agent. Insurance Companies can change the terms and conditions of the coverage you have initially purchased when your policy renews. Sometimes major coverage changes, some for the better and some for the worse, are made before your next renewal date. Those changes will be included in the paperwork sent to you at renewal time. Sometimes changes taking away valuable protection are not noticed by policyholders in all the renewal paperwork received. Insurance agents for these companies as well may not bring these changes to the attention of the policyholder either at renewal time. What is an example of a major coverage change? One carrier I have worked with as a broker last year eliminated a coverage known as “Guaranteed Replacement Cost Coverage”. The company decided to replace this with “Extended Replacement Cost Coverage” with a cap of 125%. These terms will be discussed in the section of this guide called Guaranteed, Extended and Replacement Cost Dwelling Coverage. The insurance company typically notifies agents when a change in coverage benefits will take. Sometimes the changes can be very positive for the policyholder. When I received the agent’s copy of one of my client’s renewals with this company, this major change of coverage was not readily apparent on the first few pages of renewal paperwork. In fact, the renewal declaration pages looked identical to the prior year’s renewal declarations, other than some of the limits of coverage had been increased. I called up my client to discuss this situation. I was curious to see how well it was brought to the attention of my client how the claim settlement provisions for his house will be dramatically changed upon renewal. Keep in mind the renewal paperwork sent from the insurance directly to you the policyholder may not be identical to what the agent receives. For example, copies of PolicyHolder Messages, sent to you the policyholder may not be included with the renewal paperwork sent to the agent. The conversation went something like this. Me: Hello, this is David. I am calling to see if you have received your home insurance renewal from the XYZ Insurance Company. Client: Yes, we did, everything seemed O.K. Thank you for calling to touch base with us. Me: Did you notice anything in what you received that stood out and brought to your attention some changes have been made to your home insurance policy? Client: No, I don’t recall seeing anything that caught my attention. Me: Please locate your renewal paperwork so I can discuss some changes that have occurred. Client: I thought I saved the paperwork, but let me check. As a matter of fact, I don’t even think I saved all the paperwork that came with my renewal. Has something important changed on my policy? Me: Yes, as a matter of fact, there has been a major change in the type of coverage you have had on your policy that protects your house. I was really interested in finding out if this major change was clearly and boldly brought to your attention in what you received. It does not sound like the insurance company did a very good job making sure you understood what has just happened to your coverage. Your insurance company has eliminated guaranteed replacement cost coverage and now only pays up to 125% over and above your dwelling renewal limit. I was able to assist this client in obtaining a better policy. A few weeks later I was able to get from another client with this same insurance company their copy of all the renewal paperwork received. The above major change in coverage was mentioned amongst many papers sent along with the renewal, but not boldly brought to the attention of the policyholder. Obtaining a Copy of Home Insurance Policies and Endorsements from the California Department of Insurance In the summer of 1999, I thought I could simplify the process of obtaining copies of all the homeowner policies and endorsements offered by the carriers in California with the largest market share. In California, an insurance company must file with the California Department of Insurance a rate filing for the rates they want charge for Home Insurance and Endorsements. Attached to the rate filings will be an actual copy of the policy and endorsements for which the rate filing was made. This information is public information and anyone can go to the California Department of Insurance to view the rate filings. The above rate filings can be located at the California Department of Insurance’s Rate Filing Bureau, one of which is in San Francisco, Los Angeles and Sacramento. To see rate filings, I found it was necessary to make an appointment with the Rate Filing Bureau. Before my first visit, I had no idea on how this valuable information was being organized by the Rate Filing Bureau. I imagined that at the Rate Filing Bureau’s office they simply had filing cabinets organized A-Z for all the insurance groups and/or companies offering insurance in California. I thought I could simply present a list of the companies of whose forms and endorsements I wanted to “view” and the clerk would simply go to the filing cabinet and pull those forms for me to look at in the “viewing room”. Unfortunately, the filing method at the Rate Filing Bureau does not maintain such a simple filing system. In fact, the system that is in use makes it virtually impossible to locate the documents I needed to find. I discovered trying to locate in the public records copies of all the key policies and endorsements I was after was like trying to find a needle in a haystack! Here is how the Rate Filing Bureau filing system works. Because of how insurance rates are approved in California, when an insurance company wants to charge you whatever rate they want to have approved, the company is required to submit a “rate filing”. That rate filing has a Rate Filing Number, the specific insurance company name, the type of coverage it is for, and various other items. In addition, rate filings are organized by the dates they are submitted. With the above in mind, if I was looking for a copy of the home insurance policy offered by, for example, the XYZ Insurance Company, to begin with I would have to know the exact date the XYZ Insurance Company filed its rate filing with the Rate Filing Bureau. If the XYZ Insurance Company’s home insurance policy form and rates were submitted for approval, for example, on September 1, 1995, unless I knew this fact, it seems nobody at the Rate Filing Bureau would be able to find the file in which the policy form could be located! After several hours of looking at pages and pages of rate filing tables and filling out forms for clerks to go pull those files, I found it was virtually impossible to locate what I was after. When I asked the people who assist visitors to the Rate Filing Bureau if there was any other way to locate this information, I was told none existed. It is important to know that the various home insurance policy forms and endorsements offered to California homeowners are accessible to the public, if you can locate them! As mentioned in my introduction, consumers can go to many websites for other types of products, such as cameras, camcorders, cars, TV’s, etc. and see the actual specifications of that product before they decide to purchase it. Consumers can go into stores and look at the products first hand. It is my opinion that consumers should also be able to read the policy protecting one of their most important investments before purchasing it as well. The fact that it is so difficult to easily obtain copies of the various home insurance policies in the California marketplace, makes me wonder if insurance companies would rather not have consumers reading and really understanding what they are selling you. Go visit the website of any major insurance company that offers homeowners insurance. Go to any major website that offers you on-line quotes for insurance. I have yet to find one that allows you to download in a PDF format a generic copy of their home insurance policy form and endorsements that can be added so that you the consumer can see before the purchase the actual policy you are about to buy. The Internet easily allows for documents to be downloaded in PDF format onto personal computers. The software to download documents and view documents saved in a PDF format is free from Adobe Software and can be found at the following website: http://www.adobe.com. On their homepage, go to the icon that says “Get Acrobat Reader”. To the insurance industry and to the body that regulates it, you should demand “Show Me the Policy”. If consumers had the ability to download the various insurance policy forms and endorsements available, based upon the sections that follow you could see in black & white some very important coverage differences that exist. Understanding the significance of those differences might make you think twice about purchasing a particular policy. Unfortunately, I am not in a position to provide you with the ability to download generic copies of the various types of policies and endorsements available amongst all the carriers that offer this coverage. The best I can do is educate you as to what as to what “facts” you should look for and what questions you should ask when considering the purchase of home insurance. Conclusion: You should remember the phrase “Show me the policy(including all the endorsements that will be attached)” before your make your final purchase. You should ask the on-line provider or if you end up talking to an agent, to provide you with a copy of the complete policy and endorsements you are considering purchasing. Some insurance companies include in their basic home insurance policy a copy of all the endorsements that might be included and others don’t. For those contracts that don’t include all the endorsements, you need to get ahold of them too. A complete policy would include all endorsements attached to the basic homeowners policy being sold. It is ultimately your responsibility to read these documents and understand what you have purchased. In addition, and perhaps most importantly, don’t be fooled into thinking the Internet has now made it possible to simplify and quicken the process of buying homeowners insurance that will automatically provide the right type of coverage for a serious fire loss and will not leave you potentially thousands of dollars of out-of-pocket expenses. Why? Because policies offering "Guaranteed Replacment Cost Dwelling Coverage" with full building code coverage are non-existent among any major insurance company today in California. Most polices have only "Extended Replacement" cost coverage and limited building code coverage. These issues will be discussed in the next section. In the next section, I will discuss some major changes that have occurred in home insurance policies in California over the last several years and what you might be able to do to about these changes. David Shaffer Insurance Services © 2000 |
|
||||||
David Shaffer Mortgage and Insurance Services
