9 April 2018
Understanding your insurance policy – including what you are covered for, and what you need to do to make a claim – could save a lot of headaches, says Insurance & Financial Services Ombudsman, Karen Stevens.
“Insurance does not cover you for all things at all times,” says Karen. “We urge people to understand their policy before they need it – including what is and isn’t covered, and how to make a claim,” says Karen. ”Insurance features that people often struggle to understand, include: what is gradual damage, proving loss, and when an excess must be paid.”
1: Gradual Damage won’t be covered
“Most house insurance policies will cover sudden and accidental damage, not gradual damage, and 6% of calls to our office are about gradual damage,” says Karen. “People make claims for damage that has developed slowly, or gradually, and they are surprised to learn it’s not covered.”
“Water damage is a recurring issue, especially when the damage is discovered suddenly, but has been happening over time. It might be the much loved and watered plant which has caused the carpet below to rot, or the rotten laundry floor which suddenly gives way, having been saturated by a leaking washing machine for months.”
Karen says it is not the discovery, but the cause, of damage that is considered for insurance cover. “For example, a homeowner made a claim as she discovered her driveway was sinking in the middle. But it was discovered that the damage was the result of water leaking from a basement, which had flooded months earlier, so the claim was declined.”
Karen says if you find a leak, take immediate steps to prevent further damage and notify your insurer.
2: You have to prove your loss
“To make a claim you must prove your loss,” says Karen. “This means proving that: the damage was sudden or accidental; you owned the items, and the value of the items. These things must be proved before the insurer is required to consider your claim.”
7% of calls to the IFSO Scheme relate to declined claims because the insured couldn’t prove their loss.
“Keep all receipts, valuations, and photographs of the things you own, particularly anything that is valuable or unusual,” says Karen. “With jewellery, often a photo isn’t enough. Special jewellery should be valued before anything goes wrong and, if necessary, listed separately under your policy.
After disasters such as cyclones, earthquakes or floods, take photos or videos of the damage, and contact your insurer before throwing anything away. “The aftermath of natural disasters is a really stressful time, but we’ve seen cases where people have cleaned up and later had to deal with a declined claim as they don’t have the evidence to prove their loss.”
3: You have to pay an excess
10% of general insurance enquiries are about insurance excesses. “In most cases when an insurance claim is accepted, you have to pay an excess,” says Karen. “One common issue is when people are not at fault in a car accident, but still have to pay an excess. The other common issues is when people have to pay separate excesses for separate events.For example, when rooms in a house are damaged by two or more separate events, but claimed for at the same time, it is likely to result in two excesses.
An excess is a form of self-insurance. It helps to avoid too many small claims which would increase premiums for everyone. The amount of excess varies according to the type of insurance, and some policies will waive the excess in certain circumstances; for example, some car policies don’t require an excess to be paid for a broken windscreen.
“Your policy will say when you must pay an excess and how much it will be. Sometimes you can increase the excess payable as a way of decreasing your premiums.”
On average, 3,500 people contact the IFSO Scheme each year with a problem or complaint about insurance or financial services. “We monitor trends so we can try to inform the industry and consumers about issues that can be better managed or, ultimately, avoided.”
The IFSO Scheme has been resolving complaints about insurance and financial services for 23 years. Our service is free and independent.