Facing declining home values, Californians may be dangerously opting to underinsure their homes, according to a statewide poll.
 
More than a quarter of the 800 people randomly interviewed in a poll commissioned by the Insurance Information Network of California indicated that they believed they should reduce the amount of insurance on their home because its value had declined.

According to the random statewide survey, 26 percent of Californians believe they should reduce their insurance coverage because the resale value of their home has dropped.

“This is a financially dangerous myth,” said IINC Executive Director Candysse Miller. “Just because the resale value of your home may have declined does not mean that the cost to rebuild it has also dropped – and that should be your target.”

Forty-three percent of those surveyed disagreed with the statement, “My home value has dropped over the last couple of years and therefore I can or should reduce my insurance policy coverage.” Still, a troubling number of respondents agreed with the comment, Miller said.

“To protect your investment, you should consult your insurance company or agent each year and review any changes that may increase the replacement value of your home or property,” Miller said. This includes remodeling projects and major purchases.

In a related question, respondents faired much better when asked for the best strategies for saving money on insurance.

Thirty-five percent smartly suggested comparison shopping multiple insurance companies, while another 30 percent said that buying both auto and home policies from one company would reduce their insurance costs – both proven techniques for managing household insurance costs.

Meanwhile, another 7 percent suggested reducing policy limits or increasing deductibles. While increasing deductibles can cut costs, policyholders should carefully evaluate their insurance needs before reducing policy limits, Miller said.

The poll was conducted for IINC by Public Opinion Strategies September 21st – 24th with a margin of error of 3.46 percent.

Past surveys by IINC revealed that while as many as two-thirds of Californians believe that homeowners have the primary responsibility to keep their insurance policies current, only about one-third had actually read their homeowners policy in the past year.

IINC offers a number of free Web-based tools to help consumers track and evaluate their insurance and finances, including software to track financial goals and create a wallet-sized insurance information card. For more information, visit the IINC Web site at www.iinc.org.

IINC is a non-profit, non-lobbying association dedicated to helping the public understand insurance and manage risk.


2008 Poll Question Results

Q: On a scale of one to five, where five means you STRONGLY AGREE with it and one means you STRONGLY DISAGREE with it, how would you rate your agreement with this statement?

My home value has dropped over the last couple of years and therefore I can or should reduce my insurance policy coverage.

     14%    Strongly agree
     12%    Somewhat agree
     21%    Neutral
     15%    Somewhat disagree 
     28%    Strongly disagree

Q: Which of the following ways do you personally believe is the best way to keep your insurance affordable? 

     35%   Comparison shopping of different insurance companies
       7%   Increasing your deductible and/or reduce your policy limits
     30%   Purchase both auto and home policies from the same insurer
     18%   Do not file claims unless absolutely necessary
       1%   Do not tell your insurance company about home improvements
       7%   Don’t know
       1%   Refused