Why your home insurer won’t pay your claim
A few helpful points to avoid being told “No”
The ABI claims that property insurers pay out an average of £7.8m a day to repair homes and replace contents (ABI Key Facts 2018).
Despite this, the public opinion of the insurance industry is not always positive. Most of this stems from the experience of making a claim. We’ve all read stories about or know of someone, who has had a battle or disappointing outcome when they’ve tried to make a claim. You may have experienced it yourself.
Here we explain that, more often than not, there is a simple set of circumstances that this results from, to which busy healthcare professionals are all too susceptible, but can easily avoid….
Pete Lishman, MD of Lloyd & Whyte Ltd, explains that this is a very easy trap to fall into without realising.
“Online quote engines are designed to make buying insurance straightforward, but have arguably given many policy holders a false sense of security. This often results in the purchase of a policy that the buyer simply hasn’t had time to properly research. On the face of it, the quote they select may seem like the best deal – a good price and all the headline covers you would want – but behind the common features such as Accidental Damage and Legal Expenses, policies can vary massively from one insurer to the next. It’s only by reading through the seemingly endless pages of policy documents that the true suitability of the contract can be established.
Not realising that a particular feature or benefit is missing or that there was a requirement you must adhere to in order for your claim to be paid, can and regularly does, result in policy holders suffering a significant financial loss.”
The best way to ensure you have the right cover, as well as a fair price, is to seek professional advice; a service that, as a BMA Partner, we provide to all members free of charge. However, for those that prefer to research the market themselves and use web-based comparison sites, Pete kindly provided some key points to be aware of:
1. Non-disclosure
Insurance is a contract between you and your insurer. As a policyholder, it is your responsibility to tell your insurer about anything that might affect the contract. This may seem obvious, but all too often policyholders innocently fail to accurately disclose something that the insurer considers to be a material fact. A different interpretation of a question, giving approximations or simply forgetting to do so are all common. There are a variety of facts that are often overlooked or unknowingly misrepresented including:
• The total value of your contents and/or valuables
You must insure the full replacement cost of all the items in your house, even if there are some things you wouldn’t bother replacing or you would be happy just receiving the upper limit offered by the policy.
• The number of bedrooms
Even if you don’t use a particular room as a bedroom, if it was originally built to be used as a bedroom, it must be declared. This is a major underwriting factor to many home insurers. An innocent mistake can and has, resulted in policyholders losing hundreds of thousands of pounds.
• Security
When declaring what door and window locks you have, don’t guess. If the insurer is asking whether you have a specific type and you’re not certain, you should either find out or answer “no”.
• Having a tenant or lodger
Any paying guest must be declared, even a friend of the family.
• Having work done on the house
If you are having any type of renovation or building work carried out, you should tell your insurer first. What each company wants to be told about will differ from one to the next, just as their Policy Wordings do, but it’s best not to take the chance.
• Past claims
The need to disclose claims is known to all, but what many don’t realise is the importance of having the correct date and value of the claim. Making a guess at this information and getting it wrong, could mean the difference between whether an insurer would have quoted or not and therefore, if they will honour a subsequent claim.
If you’re in any way uncertain as to what should or shouldn’t be declared or how to answer a particular question, it is vital to seek professional advice.
2. Failing to comply with a condition
All contracts have terms and conditions, and insurance is no exception. Breaking with those terms and conditions can invalidate your insurance. It is important to read all your documents, including the Policy Wording, to check for clauses that may apply, and to make sure that you adhere to them. For example:
• Alarms
If you have received a discount for having a burglar alarm you may be required to set it every time you leave the house.
• Locking windows at night
You may be required to lock the windows of all unoccupied rooms at night, even though you’re in the house.
• Flat roof inspection
If you’ve got a flat roof, you may need to have it professionally inspected at designated intervals.
• Jewellery inspection
It may be necessary to have the settings of stones professionally checked at designated intervals.
• Valuations
Specified items will require regular valuations, failure to do so may restrict the value of a claims payment or invalidate cover.
• Safe
Once the value of your high-risk items reaches a certain amount, an insurer will require that you have a safe and that jewellery is kept in there when not being worn. At what value this applies from varies considerably from insurer to insurer, it could be as low as £30,000 or could be as high as £100,000.
If you buy your insurance through a professional adviser, they will make a point of highlighting any unusual or specific requirements and clauses such as these.
3. Underinsurance
Underinsurance is one of the main reasons you may not get as much as you anticipate. Policies require that you insure for ‘full replacement value’. For Buildings, this is the full cost of reinstating the house as it currently stands, inclusive of all associated costs, such as architect’s fees and clearance costs. For Contents, this is the total cost to replace all the items in your home, from carpets upwards, even those bits and pieces you would never bother replacing. If you fail to insure the full value of your home or contents, you could fall foul of a clause typically referred to as ‘Average’, which a large percentage of home insurance contracts include. This allows the insurer to make a proportionate reduction to any claim, equal to that of the underinsurance. For example:
Any money you saved on your premium could easily be eclipsed by the reduction applied. In extreme cases of underinsurance, particularly if the correct amount of buildings, contents or valuables cover you require exceeds a level that your insurer would have agreed to had they been aware, your claim may be declined entirely.
• Unlimited sums insured or policies with very high blanket limits are becoming increasingly common. However, it is still possible to be underinsured on this type of contract.As well as a limit on the maximum number of bedrooms you can have to be eligible for the policy, there will also be an ‘inner limit’ for Valuables or High-Risk items, typically between £10,000 and £40,000. The definition for these items will change from insurer to insurer, so it is important to check this. Depending on what is included, it could be very easy to exceed the limit. If you do, you may receive a reduced claims settlement, or the insurer could have the right to void the contract entirely.
• Cover for Personal Effects (also called Personal Belongings), which protects items taken outside of the home, is another benefit that will have a specific limit. It is also likely to be an optional extra. If you have items you want covered away from the house, check that this is on the policy and make sure that the upper limit is sufficient to replace everything you might carry on you at one time.
• Single article limit – both the Valuables/High Risk and Personal Effects sections of a policy will have a single article limit. This is the most the insurer will pay out for any one item. If you have any valuables, high risk items or items you take outside the home that exceed this limit, they must be specified on the policy. Failing to do so will either result in a claim being restricted to the single article limit or possibly being rejected entirely. Please also see reference to ‘Valuations’ earlier in this document.
4. Check it’s covered
A common reason claims are declined is because they’re simply not covered by the policy. Home insurance contracts and the benefits they provide can vary considerably. Aside from the typical features we all look for, such as Accidental Damage, Flood, Theft, Storm and Legal Expenses, there are a wide range of additional benefits available, some of which can be just as important as these headline covers. Not all policies will include all benefits however. Examples of ancillary covers that could be optional, or missing entirely, include:
• Bicycles – arguably the element of cover that is most variable from one insurer to the next. Some will cover bikes automatically, whereas others will only do so if you to take out a specific extension. Even where they are covered as standard, many policies will have a low limit of cover, such as £250, with bikes worth more than this having to be specifically noted on the policy in order to be protected.
• Accidental Damage / ‘Full’ Accidental Damage – most policies will now include an element of Accidental Damage as standard, however there is typically a restriction on the type of item covered. Under the Buildings cover it is normally limited to fixed glass and sanitary wear and under the Contents, it’s Home Entertainment Equipment (this often doesn’t incorporate laptops or tablets, as these would likely be categorised separately under Computer Equipment). This means that dropped iPads, spillages on carpets or DIY mishaps would not be insured. To obtain wider cover for the rest of your home and its contents, an extension would need to be added for ‘Full’ Accidental Damage.
• Trace & Access cover – in the event of a leaking pipe, the resulting water damage should be picked up by most Buildings insurance policies. However, without Trace & Access cover, the costs of a plumber locating and accessing the leak, then reinstating any walls or floors necessarily damaged in the process, would not be insured. In many cases, these unavoidable costs are more expensive than the cost to repair the water damage itself, potentially running to thousands of pounds. Trace & Access is therefore an essential requirement and ideally have a generous upper limit, not just £1,000 or £2,000.
• Alternative Accommodation – in respect of significant incidents such as fires, floods or burst pipes, it isn’t sufficient for your policy to just cover the costs of repairs. You also need to be certain that it will pay for you and your family to rent a suitable alternative property if yours has to be vacated during the course of the works. As well as checking this cover is included, it’s also important to check that the maximum amount the policy will pay will be adequate to rent a comparable property. You should also ensure that the maximum period it will continue to pay for is likely to be long enough if a major renovation or reinstatement is required; a minimum of two years is best.
Always check that any potential policy provides the cover you require and if you are in doubt that a particularly feature is included, ask the insurer directly.
How confident are you in your cover?
If you hold any reservations that your insurer would settle a claim as you would hope or you suspect your policy isn’t meeting your requirements, seek professional advice as a matter of importance. Don’t put it off and hope that you won’t have to put it to the test. The potential repercussions could be devastating.
As a BMA member, you are entitled to no obligation advice from our team. If you don’t already have a professional insurance adviser, it is worth making the most of this benefit and giving them a call to discuss your circumstances. In addition, we have products exclusive to BMA members, which have been developed to meet the demands and needs of healthcare professionals.
