4 Consumer Misconceptions About Personal Lines

As spring draws near, it’s time to reconnect with your clients. There is no better time than now to reach out and address some common insurance misconceptions held by customers.

Misconception 1: “I don’t live in a flood zone, so I don’t need flood insurance.”

According to the Federal Emergency Management Agency (FEMA), flooding is the number one natural disaster in the country. If a homeowner lives in a high-hazard flood zone and has a mortgage, the homeowner is required to carry flood insurance. Other areas are considered moderate-to-low hazard flood zones. Most homes in these areas are not required to carry flood insurance, however, FEMA reports that nearly 25 percent of all flood claims come from moderate to low flood risk areas. Customers should understand that homeowners policies do not cover flood damage, but flood insurance is available in most communities. Consider these simple steps to help avoid that empty feeling in your stomach should the waters begin to rise:

Make sure each property client understands that flood is not covered by their homeowners policy. If a client refuses flood insurance, consider having them sign a flood rejection form. That way, if they have a flood claim, they can’t come back to you and say, “I didn’t know” or “You never told me.”

Misconception 2: “My home value has declined, so I should be able to lower my limits to help save money.”

In some areas of the country, property values have been hurt. Some consumers are considering reducing policy limits as a way to save on homeowners insurance. While there are options for reducing homeowner premiums, it’s important to educate customers on the need to maintain coverage levels that match their exposure. Additionally, take the opportunity to explain the difference between market value or tax appraisal of the home and the cost to rebuild if there is a loss.

If a client asks about reducing limits, or suggests finding ways to save on insurance, remember to provide other options like the following:

• Check if there are discounts available that are not being applied to the policy.
• Check to see if the client has all of policies with one carrier.
• Rounding accounts with home, auto and other policies may offer savings as well as a more seamless customer experience.

Misconception 3: “Adding my boat to my homeowners policy will provide adequate protection while I’m out on the water.”

While customers may find it easy to include their boat on their homeowners policy, it is important for boaters to understand the extent of coverage afforded, as well as the additional options available on a separate watercraft policy. For example, adding a boat to a homeowners policy does not add water sport liability, motor damage, towing expenses should their motor quit, or coverage for ice and freezing.

Even if their vessel was not a significant expense, boaters should consider where they will keep the boat, how and where it will be used, and how they may be exposed to different risks. Not only is this is an opportunity to meet a boater’s needs, but it is also a chance to customize with additional coverages for things like fishing equipment.

Look through your client list to see if there are boats on homeowners policies, and consider reaching out to these clients to discuss the watercraft policy.

Or, if a customer is getting a boat this year, take some time to explain the value that a watercraft insurance policy can bring.

Misconception 4: “The gap insurance offered by my car dealer was a waste of money.”

As car dealerships began their 2011 sales season with President’s Day deals, many clients who either purchased a new car or who are shopping for one may not contemplate the need for additional insurance coverage for their vehicle. In fact, clients who finance a new car don’t always consider getting gap insurance on their own or when it’s offered at the dealership. While loan or lease gap coverage can provide added protection for clients who purchase a new vehicle, buying the coverage from the dealership is typically more expensive than asking an insurance provider directly.

Let clients know about the importance of gap insurance and other coverages or discounts that may be available to them.

Before the summer season is in full swing, contact your clients about common situations for which they may need insurance advice, such as buying a new car, boat or preparing for flooding season. These situations bring special circumstances into play where a client may not fully understand what is covered.

Baisden is vice president, Travelers Personal Insurance Division, with responsibility for Countrywide Products and Services (CWPS).