While these options may be out there for many property owners, many consumers are unaware of the possible shortfalls.
When it comes to nearly any kind of product, including homeowners insurance policies, just because it is cheap, it doesn’t necessarily mean that it is providing a good value and it doesn’t mean that it is worth the money.
This is a problem being increasingly discovered by property insurance customers in Alabama.
Unfortunately, all too often, customers feel that the best opportunity in homeowners insurance is the one that will come with the lowest premiums every month. It takes a very hard lesson to teach many people that value and price are not necessarily the same thing. In April, that was learned by many people in the Mobile and Baldwin counties in the state, when heavy rains caused massive flooding in the region.
Though there were nearly 400 homeowners insurance claims made, only a sliver were settled with payments.
Moreover, among those insurance claims that did lead to a payment, the vast majority were made based on an actual cash value settlement method. Since the items that are protected by that type of policy depreciate in value with each passing year, so does the amount of insurance coverage. Therefore, when a claim is actually made on this type of policy, the policyholders were not provided with a payment that reflects the full cost that was paid for what was lost. Instead, of being paid the amount that it would cost to replace the item, they were paid the amount that the item had in value.
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According to the president of the Alabama Gulf Coast Association for Independent Agents, Lance Niel, the issue is not in the existence of these policies, but it is in the fact that the majority of consumers do not fully understand what coverage they are actually buying. He explained that “Our concern is for our community and AIUA policyholders that after a wind event or a hurricane they are going to be left in a position where they can’t repair and rebuild, which is obviously going to negatively affect the rest of our community.”
Niel also explained that the problem continues to grow as there are around 29,000 policies within the wind pool that would be settled with payments that are based on the method of actual cash value. The primary concern is for consumers to ensure that they educate themselves when they purchase a policy or when their current coverage comes up for renewal.