Transcripts

"Dealing With Disaster" - Part 3: Insurance Awareness

SUSIE GHARIB: All this week, we`ve been looking at how Americans can prepare for and cope with unexpected disasters. One of the most important ways to protect yourself from financial failure in case of disaster is to have insurance. As we wrap up our series "dealing with disaster," Jeff Yastine looks at how a hurricane made residents of one Florida town aware of how important it is to be properly insured.

JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Punta Gorda, Florida. This was ground zero in August 2004, when hurricane Charley roared through the area. It was the first of four hurricanes to hit the state that year, causing billions of dollars in damage. The debris has been cleaned up, but even now months later, the damage is plain to see in many buildings and homes. And other houses, seemingly intact, have blue tarps on top, indicating serious roof damage. The region has always been at high risk for hurricanes, but many homeowners found out too late that their policies did not fully protect them. Buying coverage for hurricane winds, or windstorm insurance is expensive, and the policies come with high deductibles, so many homeowners wound up paying for thousands of dollars in repairs out of their own pockets. Insurance agent Wilson Wheeler says the storms have proven to be a wake-up call for his clients, with many questioning whether they`re adequately insured.

WILSON WHEELER, INSURANCE AGENT: Are we insuring to the right amount? Is this proper coverage? Am I OK with the coverages that I`m buying? What are my deductibles?

YASTINE: Insurers say one of the biggest problems they see is people being underinsured, oddly because homeowners perceive certain kind of coverage as being too expensive or because the replacement value of the home keeps moving higher, but the homeowner does not adjust the coverage to reflect that additional value.

GORDON STEWART, PRESIDENT, INSURANCE INFO. INSTITUTE: People say, "oh my gosh, this may cost me more." It doesn`t occur to them that the house is now worth maybe 25 percent more and that for another $50 to $100, they could take care of that value. So it`s really, they`re trying to save a little bit of money for no particular purpose, because the purpose of insurance is to have your risks covered.

WHEELER: But it`s amazing, the people that remodel, upgrade, rip out bathrooms, change kitchens, add rooms, add pools, add carports, add screen enclosures, and we never know about it. And so all of a sudden in addition to the 5 or 6 percent inflation guard, they`ve added a $25,000 or $30,000 improvement to their home, and that`s not accounted for.

YASTINE: To prevent this, insurers say you should talk to your agent and make sure you`re coverage is keeping up with inflation and whatever changes you`ve made to your home. Also, make sure you`re buying coverage from an insurer with high ratings for financial soundness. In the wake of hurricane Andrew in 1992, a number of insurers went bankrupt, making policies worthless. And check what kind of events your policy does not cover. In many regions, floods, earthquakes, even landslides may be excluded from your standard policy and require your buying separate coverage. And sit down and actually read your policy and note the details. Especially important is how much comes out of your pocket in the way of a deductible, before your insurance kicks in.

DOUGLAS LAFAIVE, PRES., LAFAIVE & ASSOCIATES/CLAIMSHELP.COM: The majority of the people that I run into haven`t even read their policy. They may get a, what`s called a declaration page from their insurance agents or insurance company. They look at it. They see their name, the amount of coverage on the policy; and I don`t think they -- or my experience is they don`t read the policy itself to see what they`re covered for and what they`re not covered for.

YASTINE: So whether your home is at high risk or low risk of being involved in a disaster, the key is to make sure that your homeowner`s insurance is ready to handle a worst-case scenario. Jeff Yastine, NIGHTLY BUSINESS REPORT, Punta Gorda, Florida.