Don't Skimp on Homeowners' Insurance

Buyers who try to save money by cutting back on their homeowners' insurance coverage could regret it, a new study warns.

United Policyholders, a San Francisco consumer organization, analyzed the aftermath of last fall’s forest fire in California. The group's research found that 75 percent of fire victims didn’t carry enough insurance to cover their losses.

California Insurance Commissioner Steve Poizner says his department believes that the insurer has some responsibility for making it clear how much insurance a homeowner needs to buy in order to replace a home that is totally destroyed. So far that view hasn’t been supported by court decisions stemming from lawsuits by unhappy customers whose insurance came up short.

Insurance companies say it isn’t their fault that customers don’t buy enough insurance. "Insurance companies do provide information and options and analysis about rebuilding costs," says Sam Sorich, president of the Association of California Insurance Cos. "But ultimately the decision about how much insurance to buy is the homeowner's. That's the practical explanation and also the legal explanation."

Source: Los Angeles Times, Marc Lifsher (06/06/2008)