Understand the importance to adjust the rebuild/replacement value in accordance with the price index and to check insurer’s changes to terms and policy. What else to do before renewing the insurance cover?
Renewal House Insurance
Insurance review can’t be done often enough
Has your house insurance changed?
Remember the method of calculating the house insurance cover was changed in June 2013. The “replacement value” based on the floor area (undefined house insurance cover) has been replaced by “sum-insured”. The onus to set the property value for a rebuild stays with the homeowner.
In the meantime house insurance policy holders have understood the importance to adjust the rebuild/replacement value in accordance with the price index. Unfortunately increasing premiums in return are stressing household budgets.
In real life the individual circumstances change frequently, too. That is why conducting annually risk assessments are recommended. Beside looking at the sum insured obtain a confirmation from your insurer that the policy conditions haven’t changed before renewing the insurance cover. It is not unusual that insurance companies change the conditions without making the new requirements clear.
Check that premium payments have been made on time and related bank statements filed. Only with that proof is your policy alive. Your home loan agreement might require sufficient insurance to rebuild your house in the event of total loss. Here you could end up in breach of your loan contract and the bank would have the option of calling back the loan. Be sure and don’t treat your house insurance like “pay and forget insurance”.
Not all insurers are the same
Insurer’s financial ability to operate in the risk business is rated from AAA (extremely strong) to CC (extremely weak). The concept of the insurance industry is simple - the premiums paid by many pay the claims of the few. If you divide your sum insured by the annual premium payment then you get an idea how many payments are required for a rebuilding your home.
Think about disastrous events and claim payouts that would stretch the financial ability, where bargain premiums can turn into misfortune and frustration. If you pay for insurance to cover the big events like fire or natural disasters, then you could choose lower premiums and higher voluntary excess.
Reviewing sum insured and policy
As already pointed out the risk to keep the house insurance policy up-to-date lays with the homeowner. When setting your sum insured make sure in addition to the rebuild value of the house you allow for demolition, architects, planning, engineer's fees and the unknown.
Over or under insured, when disaster happens, is never a problem for the insurance company, but it sure is for you. Being honest, calculating and providing an accurate sum insured is guess work. I use the online calculators "as a minimum" to calculate the cost of replacement, but even independent valuations remain as educated estimates.
I tried different rebuild-value calculators with different results. The basis for these estimations – who knows (price index, inflation multiplied by what?). In a disastrous event nobody can tell today how much rebuild costs might jump up because of supply and demand.
Watch out for the mismatch of terms on the policy document and published descriptions of your insurance cover. I changed several times insurance companies because of lack of transparency. It might be the worst experience to discover having paid for years for insurance cover that does not exist.
House insurance tips
In discussions with homeowners I got the impression that people are more concerned about being under or over insured than insured at all in terms of what the policy document covers or not. Important is thinking it through, identifying the risks and putting it in writing on the policy.
Keep up with increasing costs
In comparison look at the price index and inflation. The replacement costs are more driven by the economy and costs of services, materials and for council fees.
Choose the right excess
Higher excess results in lower premium, because the insurer is covering less low cost claims. Filing a low cost claim you lose the “no claim” bonus and your insurance premium payments increase. Choose an excess that matches your risk profile and “Voluntary Excess Options” to get affordable cover.
The onus of proof is yours
To determine the value of an asset has always been on the policy holder. Insurance companies are not valuers, never have been and “value” their own commercial interest. Take photographs to be registered with your policy otherwise the insurance assessor might overrule your claim.
Read the policy and understand its wording
The insurance policy document is your entitlement. Understand what is or is not covered by your policy. An insurer will only pay you what they have to pay, so over insuring is a complete waste.
Be prepared and maintain your paper work
Homeowners who get in line first filing a claim have a better chance of recovery than those who make a claim little bit later (learned from CHCH). Keep your papers up-to-date.
Check your insurance file—claim history
As insurance companies tighten their belts, they are becoming picky, too. Your insurance application can fail or even worse your claim could be declined if something is mistakenly wrong on your insurance file.
Note - under the blanket of not having a national security ID, the misuse of the driver license and the Privacy Act bogus things do happen. Note - not all insurers are connected to the Insurance Claims Register and have their own database, ask your insurer!
· On my file has been recorded a laptop claim against a rental property. I never had a laptop and content insurance for that rental property.
· On the Insurance Claims Register I had an entry with wrong names stating that TOWER paid for a claim. That entry came from the insurance assessor for a proposal. I withdrew the claim and no payouts have been made.
Guess what could happen to your claim when your signed no claim declaration differs from your insurance record.
Follow the tips, reduce risks and save premiums to pay. Think about installing an alarm, do regular checks and maintenance, and importantly keep a proof. Insurance companies will generally charge you a lesser premium for lower risks.
Remember—insurance and warranty is not 100%, look around (leaking building, unpaid claims, etc), keep your entitlement alive. Good luck.
Klauster Properties Ltd. - Homeowner's Blog
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