We’re coming up on flood season. There’s always a chance of an earthquake. The anniversary of the 1962 Columbus Day Storm is less than a month away. Think high water, falling trees, brush fires and burglars. Maybe it’s time to think about insurance. And read your insurance policies.

It’s something that you probably haven’t done in a while, if ever.

In the opinion of Ed Budd, executive director of the Society of Insurance Research, headquartered in Shelbyville, Ind., “I would say that not 1 percent reads the policy. The general understanding is that people don’t read their policies.”

They don’t, even though this might be one of the most important things a person buys, every year.

“We assume that most people look at their policy when they first get it, and again when they need to file a claim. We recommend that people review a policy at least twice a year,” said Stephanie Marquis, spokeswoman from the state Office of the Insurance Commissioner in Olympia.

And even if a policyholder reads a policy, there’s no assurance that the particulars will be understood.

David Corum, vice president of the Insurance Research Council in

Malvern, Pa., said last week, “We have found some evidence that there is not as high a level of understanding of deductibles as there should be. We have found that only 69 percent of renters who have a policy knew that they had a deductible.”

And only 52 percent of renters with renter’s insurance understood that when a deductible goes up, a premium can go down.

In other words: If you’re willing to pay up to $1,000 of your loss, the insurance premium you pay will cost you less than if you’re willing to pay only $500. If you’re willing to pay up to $2,000, it will cost still less. Deductibles can be a part of auto as well as homeowner’s and renter’s insurance policies.

That not everyone understands this, said Corum. “It’s not very encouraging. Well, there’s room for improvement.”

EXPERT OPINION

“I think most people don’t read their insurance policies. I didn’t read mine until I started working in the insurance field,” said Arthur Flitner, director of knowledge resources for the American Institute for CPCU and the Insurance Institute of America.

CPCU stands for Chartered Property Casualty Underwriter, which is a designation certifying that someone dealing in insurance has been trained and tested in matters of insuring property.

“You want to look at the credentials your agent has,” Flitner said.

Underwriters, as well as the lawyers they employ, are likely to have read the policies they sell.

“In an ideal world,” Flitner said, “everybody would be interested in their insurance and would read their policies and know what they had, and we’d all be informed consumers. We know they’re not going to do that.”

Flitner points to two areas that someone buying a property policy should consider.

“One of the most common things is jewelry. You’re usually limited to $1,000 to $2,000 for theft. That may cover a wedding ring.”

If you can’t make sense of the policy, ask your agent or a broker, or contact the Office of the Insurance Commissioner.

“You need to have an adviser who is knowledgeable,” Flitner said.

“Another very important thing – earthquake and flood insurance. Both of those causes of loss are excluded by your basic homeowner’s policies.”

People, he said, don’t want to read their policies.

“They also sometimes don’t want to heed the advice of their insurance agent,” Fliter said.

He advises: “Get an agent you trust who has credentials and a good track record, and listen to what the agent recommends. A good agent is always going to recommend earthquake and flood insurance.”

Some pertinent facts:

 • In Washington, according to Marquis, approximately 12 to 15 percent of homeowners have earthquake insurance.

 • Statewide, 34,818 flood policies are in effect.

 • According to the Insurance Information Institute, the average premium for a homeowner’s policy nationwide was $764 in 2005, up 4.8 percent from the year before. In Washington, the average premium was $589, ranking 44th nationwide.

 • Renters paid $193 nationwide in 2005, down 1 percent. In Washington, they paid $173.

 • According to the Insurance Research Council’s Corum, 85 percent of people who are buying a home or who own a home have a homeowner’s policy. For renters, the number falls to 37 percent.

A FEW OTHER NUMBERS

Fire, lightning and debris removal cost 34.68 percent of the total insured losses in the U.S. in 2006. Wind and hail cost 28.26 percent. Theft cost only 3.66 percent, according to the Insurance Information Institute.

Here’s how one small part of that indemnity might be stated in a policy, from a sample agreement provided by the Northwest Insurance Council. From Section E. 1. (“Debris Removal”): (a) “We will pay your reasonable expense for the removal of: (1) Debris of covered property if a Peril Insured Against that applies to the damaged property causes the loss; or (2) Ash, dust or particles from a volcanic eruption that has caused direct loss to a building or property contained in a building.”

Under Section (b), please note that the policy “will pay up to $1,000 for the removal of (1) Your trees felled by the peril of Windstorm or Hail or Weight of Ice, Snow or Sleet.”

Because policies are written that way, people might have a good excuse for not spending time trying to read them. Why is “Peril” capitalized in one instance, and in another not?

And have you wondered about nuclear war?

Forget it. You’re not covered.

Unless you buy excess coverage.

And one other thing to consider: Insurance companies do take note of a person’s credit history. The companies believe that there’s a relationship between credit history and the likelihood a person will file a claim. The Legislature has considered the issue and might consider it again, but today, a company can use credit data when adjusting premiums or turning down an application.

“Use credit wisely,” suggests the Office of the Insurance Commissioner.

AUTO INSURANCE

The average expenditure for auto insurance in the U.S. in 2005 was $829, down 1.3 percent from the year before, according to the Insurance Institute of America.

In Washington, drivers paid an average of $541 for liability, $265 for collision and $132 for comprehensive.

Although most states require that drivers be insured, 15.6 percent of drivers nationwide have no insurance.

You can insure yourself against these drivers – whether uninsured or underinsured – by buying uninsured motorist coverage.

In Washington, drivers are required to have liability insurance with a value of $25,000 per person, $50,000 per occurrence and $10,000 for property damage.

This means that if you’re in an accident that’s your fault, someone else who is injured can collect up to $25,000. If more people are injured, the total limit they can collect from your policy is $50,000. Damage to property is covered up to $10,000.

Should you cause more damage than that, or should the injuries cost more, you yourself are liable for that amount.

And what about damage to yourself or your property?

That’s where comprehensive coverage comes in.

Nationwide, 77 percent of drivers choose to buy comprehensive coverage in addition to liability insurance; 72 percent buy collision coverage even though it, too, is optional, according to data from the National Association of Insurance Commissioners.

SOME ADVICE

Said the state’s Marquis, “Take the time to be educated. Because you don’t understand your policy and you don’t have the coverage you thought you had, you might be pretty upset” when you have a claim.”

With your homeowner’s and renter’s insurance, consider the small details:

 • Do you have coverage for additional living expenses, such as hotel accommodations for your family, should you be unable to live at home?

 • If you have an older home that’s destroyed and you expect will be replaced, you’ll need to secure “Ordinance or Law Coverage,” which would pay for the entire house to be rebuilt to meet building codes.

 • You’ve just remodeled the bathroom. The value of your house has gone up. Does your policy cover any potential loss to improvements?

 • Do you want “guaranteed replacement value” or “actual cash value” for your possessions – such as a TV set. The actual cash value of the TV you bought in 1998 is less than it was 10 years ago. To replace it would cost more than the cash value. Is it worth paying the extra premium?

Confused?

Don’t be. Several public and private agencies offer data aplenty. Help is readily available – from the sources listed above or from your agent or broker.

In Washington, the Office of the Insurance Commissioner offers two publications, “A Consumer’s Guide to Auto Insurance” and “A Consumer’s Guide to Homeowner Insurance,” both available free at www.insurance.wa.gov.

Information is also available concerning health, life, long-term care, business, crop and title insurance.

But that’s another story altogether.

C.R. Roberts: 253-597-8535

blogs.thenewstribune.com/business

Five finer points of the fine print

1. Earthquake

If you’ve got a homeowner’s policy, consider that you might need additional earthquake insurance to replace your house if it’s destroyed.

2. Flood

Chances are, you’re not covered unless you’ve talked to your agent about the federal flood insurance program.

3. limits of liability

Read your homeowner’s or renter’s policy and find the part about limits and items not covered. You might be covered up to $200 for lost money, jewelry, rare coins and the medals a loved one won in the war. Is that enough? A $1,500 limit might be all you’re entitled to for passports, personal records and securities. Chances are, your pets aren’t insured.

4. Comprehensive coverage

Drivers in Washington are required to carry liability insurance. Are you covered for your own injuries and loss of your car?

5. technology

Your policy might cover an eight-track tape player, but what about a navigation system? What if someone runs up a bill after stealing your cell phone? What if an electrical storm knocks out your computer?

C.R. Roberts, The News Tribune

Insurance Glossary

Adjuster – Someone paid by an insurance company or the insured person to investigate or negotiate insurance claims

Agent – A person who sells and services insurance policies. In Washington, all insurance agents must be licensed by the Office of the Insurance Commissioner.

Claim – A demand made by an insured person for payment of benefits as described in an insurance policy

Declaration page – The portion of an insurance policy that contains information about risk. The declaration identifies the parties in the contract and the subject of coverage.

Deductible – The dollar amount an insured person must pay for covered charges before the plan starts paying claims

Endorsement – A written form attached to the policy that changes the terms of the policy to fit special circumstances

GAP coverage – If an auto is declared totaled by an insurance company, this pays the difference between the current market value of the owner’s car and the amount still owed a lender.

Limit of liability – The maximum dollar amount an insurance company agrees to pay the insured person in case of loss

Limitations – Exclusions, exceptions or reductions of coverage in an insurance policy

NFIP – National Flood Insurance Program

Replacement cost – The cost to replace property without deducting depreciation

Subrogation – This legal concept allows the insurance company to recover – from the person responsible or from another insurer – the payment it made to the person it insures.

UIM – Underinsured or uninsured motorist. This coverage protects an insured driver from loss due to a driver who doesn’t have adequate insurance.