Posts Tagged ‘Exclusions’

With massive increases in fraudulent claims, Insurance Companies being hit by multiple natural disasters and premiums levels fluctuating widely, can you control the risks that are inherent in owning or occupying residual property?

Picture the scene – you have just opened your annual renewal documentation and the premium seems reasonable. What do you do? Some will hit the “Go Compare” websites and get cheaper premium quotations. Some cannot be bothered and simply file the paperwork (doing nothing is a great option as this usually means your policy will be automatically renewed).

What is wrong with this little scenario?

The answer is “nothing”, in many cases. However the right answer must be based on your own particular circumstances. I would argue that never has a time existed whereby are you more strongly recommended to STOP, THINK and REVIEW before you decide what to do.

Question ONE – Has the policy cover changed in any way OR does it include all that you need? Often the excess payment is incremental based on what is being claimed; Often the list of exclusions has been extended but you would need to very carefully read the small print to find such changes; often cover has been limited in some way. You need to make sure that you are getting value-for-money before you decide to renew.

Question TWO – Have you completed any works, improvements, alterations that either increases what needs to be covered or which might adversely affect the Buildings Insurance Company view of what risks they are taking in extending cover to you. Remember you are under a duty to inform Insurers if anything has changed or is unusual.

These two questions are fairly simple but do you know the real import of them? Do you know what might happen if you ignored the ground rules, buried your head in the sand, renewed blindly and then had to make a claim during the next year?

Firstly you have to understand what insurance is not. It is not a cover-all-get-out that absolves you from well maintaining your home. If you have something that you know is going to wear out after a finite period, you ignore it, it fails and causes house subsidence, are you covered? Probably not but this is a grey area. EG: If you have underground drains made from pitch-fibre your drains will fail very quickly now because we know they have not stood the test of time.

What would happen if you planted trees over your drains or too close to your home and in ten years time the tree roots cause damage that results in house subsidence – are you covered?

What happens if you completed an attic conversion, installed a Conservatory, replaced your old, single glazed windows with state-of-the-art double glazing and you fail to tell Insurers and then have a claim that includes these items? Are you covered bearing in mind your cover did not reflect the added cost of these items?

If your insurance level was correctly assessed many years ago and has been index-linked ever since and you make a claim and Insurers say you are under insured and will not pay out the full amount to reimburse you? Have you a case for complaint or not?

If only the answers were simple.

First let’s put to bed a few myths: The home value has nothing to do with the correct “sum insured” for Insurance rebuild purposes: Index-linked policies can easily get out-of-sync over the longer term (leaving you either under-insured or having paid inflated premiums unnecessarily).

In recent years some Insurers have decided to de-complicate Buildings Insurance and simply tell you that having taken data from the Loan Valuation Report they automatically insure your home for the correct amount. This is great, provided the Loan Valuer has got it right (and do not forget that often you do not nowadays get a copy of the Valuers Report to be able to check these things).

In my own case my Mortgage Company simply stated that my home is now insured as a two bed house. I explained to them it was built as a three bedroom home but that I use it as a two bedroom home. After eight years residence here I still cannot get a simply letter to categorically state that I am not under-insured (anything a staff member cannot understand gets placed at the back of the queue and is never actually answered).

So – how can you cut though all this nonsense and ensure you have good, effective cover?

In fairness the Insurance Company industry has begun to get its act together but with increased competition for short term customers (introductory deals that are not renewed OR companies placing the best deals with new customers rather than with loyal existing customers) we are all changing Insurers with greater frequency.

Upon your annual Buildings Insurance renewal PROinspect suggest a STOP and THINK policy review would be wise. The following questions are core data needed to assess how you approach your Buildings Insurance renewal:-

1-  have you improved your property in any way?

2-  does anything influence your home or has that degree of influence materially increased?

3-  have you adequately maintained your home so as not to allow risks to develop?

4-  if your cover is index-linked, how many years has this indexation applied?

5-  has the offered cover changed in any way at all compared with last years cover?

6-  if you have gone to a Comparison Website are quotations all on the exact same basis?

7-  do you live in/on a floodplain?

8-  do you live in an area of shrinkable clays?

9-  is your home and site liable to surface water flow damage (not associated with sea and river flooding)?

10-  do you live in an area prone to coal-mining, landslip, radon gas, etc… (high risks)?

11-  have you made any claims in the last year? Have these been resolved/agreed/closed?

Whether you would be well advised to take your business elsewhere, at lower annual premiums, depends of the answers to these questions. If your home is unchanged within its risk-free location and environment then the chances are that accepting the lowest premium for an agreed and defined level of cover is just the ticket for you.

However, for the rest of us, millions of occupiers, the situation is much more complex. The rest of us must carefully weigh Premium quote –V- Degree of Cover –V- Risk Assessment (of your own home and what affects it).

The quote is a given (assuming you have fully declared all relevant information to Insurers); the degree of cover is a given (but look out for small print changes or exclusions); what is not a constant is the Risk Assessment aspect of the renewal.

At what stage does increasing vandalism in your housing district need to be declared to Insurers on renewal?

How do you know if tree roots are affecting your drains if when you flush the toilet the waste goes away freely?

If your home has never flooded, and is not in or near a floodplain, how do you know if your home is at risk of water damage due to exceptionally high rain storms due to climate change?

The name of the game is to know you are one step ahead of Insurers and you do not place Buildings Insurance cover at risk. To achieve this you must understand what influences both insurance premiums and your home.

Let me explain one further aspect to consider: you have a nice home and have never had any problems or made any claims. On renewal you consider the premium quote is too high and go elsewhere knowing cover is slightly restricted but you will be saving £150 during the year.

Suddenly, nine months later, your home begins to crack and distort – you have subsidence. The Insurance Company Loss Adjuster says structural underpinning of the house foundations is needed plus many reinstate works. The cost is £75,000. Your excess payment is £1,000. However, then your troubles really begin . . . . . .

Insurers say that the cause of the subsidence is a fractured drain caused by excavations associated with the paved patio you laid yourself behind the lounge after you had a large tree removed. This work was completed 18 months ago – 6 months before you changed Insurance Company. In essence the cause of the damage, and claim, pre-existed the start of the Insurance cover and you did not declare the risk.

If you were under-insured by say 25% then any claim at all would be reduced by 25%. But, in the example just quoted above the Insurance Company could decide not to honour your claim at all. Conversely, new protocols between participating Insurance Companies might mean that if any liability is accepted then the current Insurer will pay part and the previous Insurers a further part.

So, a summary might be to say that premium level is not everything. Look beyond the premium, check the degree of cover and then Risk Assess your home and what influences it. Have you done anything that might trip you up later on when you have to make a claim? However, if funds are low and you have no alternative but to look for the cheapest possible premium quote then do so but whilst perhaps setting certain minimum degrees of cover for certain risks.

Unfortunately we have recently entered a period of high subsidence risk due to low rainwater rates over the last year or so. Cyclical patterns suggest subsidence rates will soon soar and so changing Building Insurers might just be one risk too far if you live in a clay based soil area.

At PROinspect we ensure we consider any survey completed for customers includes appropriate advice about Insurance risks of flooding, storm damage and structural movement. By this route you can reduce the risks you take. In exceptional cases we might consider the risks are so real and high such that Market Value is adversely affected – our report opinion of Value may enable you to purchase at a discounted sum to allow for such risks.

Our collective attitudes to insurance are changing.

Insurance used to be exactly that, insurance to cover problems. However, the worldwide insurance industry nowadays often makes a mockery of seeking to provide adequate cover when problems start. Delays, “average” clauses, small-print exclusions are just some of the hidden problems for the unwary. In the car insurance market young people simply cannot get sensible insurance any more.

These problems have resulted in massive instances of non-insurance which in both dangerous and sad. Social responsibility seems to have gone missing in the Insurance industry and we make this worse as record numbers of recession-hit householders are making fraudulent claims. Figures show that annually more than 100,000 fraudulent claims are being made and this annual increase, of 17%, is accelerating.

Fraud thrives in a recession but cheating on your insurance really does not pay (if you are caught). The only thing you are likely to gain is a criminal record. Dishonest home insurance claims were the most common types of fraud, the figures show, with 55,000 detected in 2008; the figures for 2009 will be higher.

Winter Fires ……..

The Fire Brigade said that fires are much more likely to occur when the temperature drops. The most common reasons why individuals cause a fire are due to heating appliances (14%) and cooking equipment (12%) going wrong or being left on.

More than one-third of fatal house fires are caused by cigarettes and other smoking materials. Nationwide figures suggest there were 3,061 accidental house fires, 99 deaths and over 1,000 injuries linked to smoking.

Summary – carelessness causes fires.

Prevention is better than ……

Homeowner claims are at ridiculously high levels at present (as much as 1-in-6 households in some areas). Owners have forgotten they can take simple steps to help prevent pipes bursting in freezing weather. Prevention is certainly better than cure when it comes to an emergency in the home so people need to clear out guttering, lag pipes and wrap up any outside taps.

Burst pipes can result in an emergency plumber having to be called out – which could be costly and may not always be covered by house insurance.  Also don’t forget that if a property is left for more than 30 days then burst pipes may not be covered.

Burst Pipes and Water Damage:

The damage from burst pipes can be horrendous, especially if the burst happens when your house is unoccupied and the burst goes unnoticed for weeks. Collapsed ceilings, saturated furniture and electrical appliances can be the resulting damage.

• One of the main causes of frozen pipes is switching the central heating off completely when a house is empty. Leaving the heating on a low temperature (7-15°C) can minimise potential danger. Boilers and heating systems should also have annual check-up, to ensure they are safe and in good working order.

• Ensure pipes are well lagged, wrap exposed outside pipes with insulating sleeves and make sure that water tanks get insulation too. Intermittent opening of your roof loft trap door to allow warm air from the house to circulate around the loft and pipes can also be wise.

• Letting a protected interior tap drip during freezing weather conditions can prevent a pipe from bursting by providing pressure relief.

• Simply turning off the water is not sufficient for a property that is to be left unoccupied for a long period – there is still a lot of water in the system, which can cause damage. Get a plumber to drain down the water and central heating system to remove the risk completely.

• Washing machines, taps, showers, baths, dishwashers etc. should be checked from time to time for leaks, because even a few drops of water could cause rotting and dampness.

• Know where gas and electricity supplies can be turned off and where your stopcock is, as speedily shutting off the water in an emergency could prevent a great deal of damage.

• Clearing snow from behind parapet wall upstands and roof valleys is also well worth the effort. Deep snow thaws and the water released travels upwards by capillary attraction between tiles and breaches the valley liner, if one is present. This results in water running down the valley underside and into your home.

• In the Autumn period it always pays to clear rainwater fittings of leaves and pine needles. Forget to do this and one result will be that the weight of snow build up and icicles will deform gutters and before long water will get into your home.

Summary – preventative medicine coupled with common-sense is wise: ignore this at your own peril as some Insurance Companies will soon be saying that you have contributed to your problems and invoke Policy “average clauses” that dilute any claim payout. Insurance than turns out to be only partial insurance, again!

Overseas Home Owners – this also applies to you. Did you know that PROinspect can also take surveying briefs for European Home Purchases (albeit that such services are expensive).

Sub-tabs here list data about First Time Buyers and Private Sale clients. These are important, special markets who may be acting under budget constraints and with little accumulated knowledge. As such they are at the mercy of potentially cynical Agents and Loan Companies.

Read through our notes and if you remain uncertain about any aspect of how you should proceed with a sale or purchase then simply call us or use the FORM on our Home Page for a request for information.

Why guess or struggle when help is at hand?

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Also included here is advice on why YOU CAN sue an errant Surveyor or Valuer. Too many times I hear people say “you can’t sue a property Professional because they wrap themselves in caveats and exclusions”: This is wrong. These notes will tell you why.

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Buyers of New Homes (not second-hand) also need special assistance as surveying and valuing brand new structures is not the same as for existing buildings. Be “in the know” and protect your investment wisely, from the start.