When it comes to shopping for home insurance, you don’t need us to tell you about the sheer number of different policies you can buy. But, perhaps you should heed this advice from the University of Chicago Law Review – who warn that more homeowners could be about to have their insurance claims denied when things go wrong.
The Wall Street Journal noted in its comments on the study that, whereas before most home insurance providers used standard policy forms created by the Insurance Services Office, many are now using their own policies instead, and a few tweaks in how these are worded can make a very big difference to claimants.
Homeowners are advised to carefully review any policy they are considering and to make sure they read the small print in the contract to ensure they know what is and what isn’t covered. One example to look out for is mold and lead coverage – while this used to be standard in virtually all home insurance policies, nowadays it frequently isn’t.
United Policyholders, a San Francisco-based consumer advocacy group, urged homeowners to ask the following questions before deciding on a home insurance policy:
- Is water damage from pipes and sewers covered in the policy or not?
- Is damage to the building’s foundations covered in the policy? And if so, is the coverage limited or does the policy provide full coverage?
- Will claims be paid at “actual cash value” or at “replacement value”?
The author of the study, Daniel Schwarcz, an associate professor at the Minnesota Law School, said to the Wall Street Journal that he is pressing for state insurance departments to publish their policies on the internet, so that homeowners and consumer groups can study them more closely. This has already happened in one state – Nevada – where both home and auto insurance policy forms can be found online.