Identity Theft and Lawsuits WorryHomeowners

By Gary S. Mogel

A surprising 90 percent of homeowners fear identity theft, butfew have any idea whether their policies cover it, according to arecent survey sponsored by Novato, Calif.-based Fireman's FundInsurance Company.

The survey, conducted by Harris Interactive of Rochester, N.Y.,also found that homeowners are concerned about being sued and oftensubstantially underinsure their residences.

Harris surveyed 1,129 homeowners over age 18 who are at leastpartly responsible for making insurance decisions for theirfamilies. The survey explored homeowners' understanding of thecoverages provided by their insurance policies for identity theft,litigation and full replacement cost.

Homeowners are justifiably concerned about identity theft.According to Federal Trade Commission statistics, identity theftjumped 72 percent between 2001 and 2002from 220,000 incidents to380,000.

Although 97 percent of the homeowners surveyed had heard ofidentity theft, and nearly one in four knows someone who has been avictim, 61 percent are unsure whether their homeowners insurancepolicy would compensate them for the expenses of re-building theircredit after being a victim of this crime. Only 11 percent of thehomeowners believe that their policy covers costs associated withidentity theft.

“With the likelihood of identity theft increasing each year,these survey results suggest that more than 60 million homeownerscould be at financial risk if they were to fall victim to this typeof fraud,” said Michelle Kenney, underwriting executive atFireman's Fund. “Despite that increasing trend, only a smallpercentage of policies actually provide coverage for expensesincurred in recovering from identity theft,” Ms. Kenney added.

Homeowners also expressed concern about being personally sued.An overwhelming 94 percent feel that there are more lawsuits todaythan there were 10 years ago. About 86 percent think high-monetaryjudgments in personal lawsuits have been excessive, and 67 percentbelieve they might be personally sued sometime during theirlives.

Despite these concerns, less than one in four have personalumbrella insurance to protect against a large-dollar lawsuit. Forthose who have umbrella coverage, the most common limit (of 44percent of respondents) is $1 million.

“We have seen a steady increase in requests for umbrellacoverage, most likely driven by the fact that in 2002, there was adramatic increase in jury awards,” said Ms. Kenney.

Four-fifths of the homeowners surveyed reported that the marketvalue of their home has increased in the last five years. However,only 63 percent of those said that they have increased theirinsurance coverage to account for that. The main reasons cited fornot raising limits include lack of time to look into an increase,not wanting premiums to go up, and simply failing to realize thatthey needed to modify limits.

“Most standard homeowners insurance policies do notautomatically provide replacement cost coverage,” Ms. Kenneypointed out. “For most people, their home is the most valuableasset they have. To inadequately insure it, for any reason, isgambling with their financial security and their future.”

One-third of the homeowners interviewed say they don't know whatit would cost to replace their home. And just under one-third donot know if temporary living expenses are covered by theirpolicies.

A summary of the survey, entitled “Fireman's Fund HomeownersInsurance Awareness Survey,” is available online at http://www.ffic.com/resources/HarrisTopline.pdf.

Reproduced from National Underwriter Edition, March 31, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.