Nine out of 10 American homeowners have concerns about becoming victims of identity theft, the fastest reported growing category of fraud in the country, yet nearly two-thirds are unsure whether their insurance policy protects them financially if this crime were to happen to them. An overwhelming 83 percent think the government should take steps to help prevent identity theft.
The revelations are among the findings released from a national survey of 1,129 homeowners conducted by Harris Interactive® for Fireman’s Fund Insurance Company. The survey explored homeowners’ understanding of the protection provided by their insurance policies for identity theft, litigation and full replacement costs for their home.
According to Federal Trade Commission statistics, identity theft jumped 72 percent between 2001 and 2002, from 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, more than half (61 percent) are unsure whether their homeowner’s insurance policy would compensate them for expenses entailed in recovering their credit following this type of fraud. Only 11 percent of the homeowners surveyed believe that their policy protects them.
“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, one of the few insurers that specializes in high-end policies. “Despite that increasing trend, only a small percentage of policies actually provide coverage for expenses incurred in recovering from identity theft.”
Fear of Litigation
Homeowners also expressed concern about being personally sued. An overwhelming 94 percent feel there are more lawsuits today than 10 years ago, 86 percent think high-monetary judgments in personal lawsuits have been excessive, and 67 percent believe they personally might be 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 coverage limit (44 percent) 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 Kenney.
According to a Tillinghast-Towers-Perrin report published this month, the total of the 100 largest jury awards was more than three times the 2001 total. In addition, the direct costs to society from the tort liability system jumped to $205 billion, the equivalent of a five percent tax on wages.
In the Dark About Home Replacement Costs
Most homeowners surveyed (80 percent) report that the market value of their home has increased in the last five years, but only 63 percent of those say they have increased their insurance coverage to account for that. Of the remaining participants, the main reasons cited for not increasing coverage include lack of time to look into coverage increase, not wanting premiums to go up, and simply not realizing they needed to change their policy.
“Most standard homeowners insurance policies do not automatically provide replacement cost coverage,” continued Kenney. “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.”
A topline summary of the survey entitled, “Fireman’s Fund Homeowners Insurance Awareness Survey,” is available online at http://www.ffic.com/resources/HarrisTopline.pdf.
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