Insurance: Fact or Fiction

August 1, 2007
Courtesy of USAA

Whether at home or deployed, you and your family need home and auto insurance. The Army provides medical insurance, but they do not cover your home and automobiles, should anything happen to them. Misfortunes, whether an everyday mishap or a catastrophic hurricane, flood, fire, or car accident, are often covered under insurance, but you need to know which accidents are covered by what insurance policy and how. Are you confident you have the right insurance to protect you from life’s little — and big — emergencies? You might be surprised. Take this quiz and find out where you stand.

7 brainteasers to test your insurance knowledge

1. A flash flood swept through my living room, ruining my carpet and damaging an antique wooden trunk filled with family photographs. My homeowners insurance will pay for all the damages.

FICTION: Your homeowners policy does not include flood coverage. In general, only policies issued through the National Flood Insurance Program provide homeowners coverage for damages from flooding.

2. My 18-year-old son wrecked his 1996 Chevrolet Cavalier. Fortunately, his auto liability insurance will pay for his car repairs.

FICTION: Generally, auto liability policies provide coverage only to third-party vehicles — those operated by other drivers — in an accident. Your son would need collision insurance to pay for the damages to his car.

3. My 1920s home has old plumbing fixtures that have corroded. My homeowners policy will pay to replace them.

FICTION: Homeowners policies cover most major perils (like fires and windstorms), but don’t include damages that consist of normal wear and tear, deterioration, or mechanical breakdowns of major appliances. You can purchase a home warranty plan for those types of problems.

4. I live in South Florida where a hurricane hit my beach house. I realize that because hurricane coverage is provided by a separate policy through the state wind pool, most hurricane-related damage isn’t covered by my homeowners policy. But my homeowners insurance will pay for food spoilage.

FACT: In areas with state-sponsored wind pool programs, your homeowners policy may exclude coverage for windstorm and hail damage. In most cases, your homeowners policy will pay for perishable items that spoil due to power loss or mechanical failure. And don’t forget, flood insurance requires a separate policy

5. If I have liability, comprehensive, and collision insurance on my car, I don’t need to buy extra insurance when I rent a car on vacation. My own insurance will cover the rental.

FACT: In most cases, this is true. But there are some exceptions, depending on your policy and the coverage rules that apply in your state. However, one thing that is consistent is that most policies do not cover car rental outside the United States.

6. My homeowners policy will cover me if I accidentally spill bleach on my antique oriental rug.

FICTION: Personal property under the homeowners policy is only covered for certain types of losses specifically listed in the policy. Broader coverage can be provided by the Valuable Personal Property policy, formerly called the Personal Articles Floater, which provides coverage for many other types of loss.

7. If my apartment goes up in flames, my landlord’s insurance will not cover my belongings.

FACT: In most cases, your landlord’s insurance covers the building — not the personal possessions you have inside of it. To cover your belongings, you’ll need a renters insurance policy, which covers theft or damage from fire, flood, and other specified perils. Whether damage or loss is covered depends on the actual event and the terms of your insurance policy.

INSURE THIS: Wild and wacky insurance stories
Here are some unusual reports one insurance company has logged over the years.

The mystery behind the swatch
Would you insure a bloody cloth? Probably so, if it were worth $5,000. And that's exactly what one member set out to do after obtaining a blood-stained swatch that came from a dress worn by 19th-century British actress Laura Keene. Keene willed the dress to her daughter, who eventually sold three of its swatches at auction. Why? Keene wore the dress while performing at Ford’s Theatre on April 14, 1865, the night President Lincoln was assassinated. The bloodstains reportedly came from Lincoln’s fatal wound. The insurance company took on the task of verifying the item’s $5,000 value when the member called to request a Valuable Personal Property policy. Using the Internet and reference guides, company underwriters tracked down a Lincoln memorabilia collector who owned one of the three swatches. Though the collector didn’t disclose the cost, he verified that it exceeded $5,000. Determining insurance risk was trickier because the swatch qualified as a rarity requiring official documentation. The company connected the member with the collector, who offered to help with authentication.

A fashion statement?
Some people with one insurer have entered claims for some rather distinctive jewelry over the years:
• a ring featuring an eyeball
• a Native American necklace, circa 1864, of bear claws and elks’ teeth
• a necklace created from a howler monkey skull and jaguar teeth

More than one way to catch a fish
That’s what one person found while fishing from a bridge one day.
As he waited for a bite, he heard a popping sound and then saw his truck roll down the embankment into the river. A faulty transmission caused the mishap. On the upside, when a wrecker pulled the truck from the water, the member found the catch of the day — a large bass trapped beneath the front seat.

Want more info?
Flood. The National Flood Insurance Program, part of the Federal Emergency Management Agency, is available to property owners in participating communities in all 50 states. For details, visit www.floodsmart.gov or call NFIP at (888) 379-9531. Many insurance companies, including USAA write flood policies issued through NFIP.