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Do your clients understand their insurance policy T&C’s?

Property insurance isn’t a luxury; it’s a necessity. But do property owners actually understand their insurance policy? Do they know what is and isn’t covered, what exclusions their policies have and what they need to do to ensure their insurance claims are successful?

Most policyholders would prefer to have a simple explanation of their insurance policy in terms they can understand and have policy details explained in a brief, one-page summary, according to survey results released by Nationwide Insurance. When asked to describe their insurance policy, consumers said their policy was too long (53%), complicated (43%), overwhelming (31%) and confusing (29%).

Other results from the survey showed that:

  • Less than half of those polled (40%) have read their current insurance policy in its entirety (in the past 12 months)
  • Only one in five consumers believe they completely understand the details in the insurance policy they purchased
  • Half of all consumers say they don’t understand how to file a claim with their insurance company after an incident

Recently, we were contacted about a vacant property that was broken into and suffered extensive malicious damage. Unfortunately, the damage wasn’t covered. However, after looking over the policy, it was clear that had the property owner understood the T&C’s of the policy and reported the claim earlier, they could have claimed back some of the repair costs.

This got us thinking: how many times have we been contacted by Letting Agents, Insurance Brokers and property owners about a property that has suffered damage but we couldn’t help them because they failed to report it to their insurance company on time? Or because they failed to comply with the T&C’s? Too many to count! 

So what are the main things to know? 

Plumbing leaks: what’s actually covered?

Water damage is a common problem in homes, and it can be caused by a variety of issues. However, not all incidents will be fully covered by a standard buildings insurance policy.  

Whilst resultant water damage from a plumbing leak or burst pipe is often covered, it’s important to understand that not all leaks from a bathroom are classed as plumbing leaks or an escape of water.  

Insurers will often appoint a loss adjuster to larger claims and they will determine if you could have reasonably prevented the leak. If they determine that you could have, then they may recommend to insurers that your claim is rejected.  

Water damage that results from normal wear and tear or a lack of maintenance may not be covered. For example, your clients might notice a minor leak, but fail to do anything about it. Gradually, that leak gets worse causing more damage so they decide to ring their insurance company.  Unfortunately,  in these circumstances, the claim may not be successful if the damage has been progressive and could have been mitigated had the policyholder acted more swiftly.  

Also, it’s important to note that in most cases insurance will only cover the damage that a plumbing leak causes, not the actual plumbing repair.

Rebuilding costs. Know your worth!

Your policy premium is linked to your rebuild value, amongst other things, so it’s important to know an accurate cost to rebuild your property from scratch.   If you set it too low, this will mean that you will be underinsured and should you ever need to make a claim, the level of underinsurance will be reflected in your settlement offer. It’s a common oversight, and one that can leave your clients unable to rebuild their homes if they suffer extensive damage. 

So what is rebuilding cost?

The rebuild value is how much it would take to rebuild your property as it is now, using similar materials, including footings, garages, outbuildings, if it was completely destroyed.  The rebuild cost is linked to the amount of premium that you pay each year and should you be underinsured, this will be reflected proportionality to any claim you make.

Rebuilding cost vs market value

You should insure your home based on its replacement cost. This is important because, in the unfortunate event that your home requires a complete rebuild, you could be left to cover any difference in price. As the term suggests, the rebuild cost is the amount of money you’d need to rebuild your home from scratch.

Rebuilding takes into consideration the price of labour and materials that would be involved in building a house identical to yours on the land you own.

Updating your home’s rebuild cost

If you make any structural changes to your house, such as a new extension or a loft conversion, these are likely to affect the rebuild cost.

If the rebuild cost increases without your buildings insurance increasing to match, you could end up underinsured and left to cover the difference if anything was to happen.

Therefore it’s important to check that your buildings insurance covers anything that adds extra value to the rebuild cost of your home.  Ultimately, the rebuild value is set by the client, not their insurance company or insurance broker and their responsibility to ensure that amount is adequate lies with the client, even if that means paying for a professional surveyor. 

What about insurance when a property is empty? 

If your client is leaving a property empty for 30 days or more, chances are their standard buildings insurance policy will not cover them. 30 days is typical, but some insurance policies will stipulate a shorter period of time and others will specify 45 days or longer.

If you know that a property you manage is going to become vacant, it is worth reminding your client to speak to their insurer to let them know. Insurers may be able to offer them additional cover on their existing policy, but if not, it might be worth them getting a dedicated unoccupied insurance policy.

If the insurance company doesn’t know the house is unoccupied for more than 30 days and your client needs to make a claim, they will risk invalidating the insurance cover.

In our experience, most people don’t fully understand their insurance policy, which is why we always say you should get in touch with us as soon as possible. With over 20 years of experience in the insurance industry, our team can quickly work out if your client would be able to make a successful claim or not and what to do to start the process.

If you need help with an insurance repair, aren’t sure how to proceed with an insurance claim or have a question about T&C’s contact us. We’re always happy to help!

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