After every major disaster, many homeowners are shocked to learn that their homeowners insurance fails to pay for their losses. The same is true in everyday events; a plumbing leak that causes thousands of dollars of damage may not be covered under homeowners insurance.

The Rutgers Center for Risk and Responsibility at Rutgers Law aims to change that through its new online tool, RU InsureScore. It is a unique tool that gives consumers information about coverage that insurance companies don’t, and it compares and rates policies of major national insurers. Jay Feinman, Co-Director of the Center and Distinguished Professor at Rutgers Law, described how the tool works and why it's useful to consumers.

Why is RU InsureScore needed?
Insurance is the only product where consumers don’t know what they are buying before they buy it. Insurance companies almost never provide copies of policy language or complete summaries of policy terms to prospective policyholders.

Even if consumers had access to policies, most of them wouldn’t read or couldn’t understand the long, complex, legal documents, or be able to anticipate the many ways in which a loss might occur or the problems that can arise if it does. Many people only discover the limitations of their coverage when they have a claim and find they don’t have adequate coverage.

What information does RU InsureScore provide?
The tool evaluates key elements of each policy—what things, risks, and liabilities the insurance covers and what the insurance pays—on a five-point scale. It also provides a summary rating on a 100-point scale, much like Consumer Reports does for consumer products. The website gives consumer-friendly explanations of key terms and the basis for the ratings.

What policies are included?
The comparison includes basic policies from 11 of the 20 largest homeowners insurance companies in the U.S., including household names such as Allstate and State Farm. The first challenge of this project—and one reason it never has been attempted before—was to acquire policies across the country from major insurers. The companies wouldn’t provide them, so we spent many hours on the websites of the few states that publish policies and the National Association of Insurance Commissioners’ online filing system.

What are the ratings based on?
We used three guiding principles in evaluating the policies: First, how frequently does a loss covered by a particular term arise, and how large are the average losses? For example, water damage and freezing losses account for about one-fourth of homeowners claims, so coverage for them is very important. Second, how much do the terms vary among policies? For example, coverage for plumbing leaks varies significantly, so it is given more weight, but replacement cost coverage for the house is essential, but practically all policies provide it, so it is given less weight. Third, what kinds of coverage do policyholders reasonably expect? For example, homeowners reasonably expect their insurance to provide better coverage for large financial losses than for small losses.