Harris surveyed 1,129 homeowners over age 18 who are at least partly responsible for making insurance decisions for their families. The survey explored homeowners' understanding of the coverages 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 theft jumped 72 percent between 2001 and 2002from 220,000 incidents to 380,000.

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

“With the likelihood of identity theft increasing each year, these survey results suggest that more than 60 million homeowners could be at financial risk if they were to fall victim to this type of fraud,” said Michelle Kenney, underwriting executive at Fireman's Fund. “Despite that increasing trend, only a small percentage of policies actually provide coverage for expenses incurred 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 today than there were 10 years ago. About 86 percent think high-monetary judgments in personal lawsuits have been excessive, and 67 percent believe they might be personally sued sometime during their lives.

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

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

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

“Most standard homeowners insurance policies do not automatically provide replacement cost coverage,” Ms. Kenney pointed out. “For most people, their home is the most valuable asset they have. To inadequately insure it, for any reason, is gambling with their financial security and their future.”

One-third of the homeowners interviewed say they don't know what it would cost to replace their home. And just under one-third do not know if temporary living expenses are covered by their policies.

A summary of the survey, entitled “Fireman's Fund Homeowners Insurance 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 serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.