General
- What should I look for in a policy?
- What types of policies are available?
- What are the typical features of most home insurance policies?
- Why do I pay more (or less) for my home insurance than other people?
- Is it worth installing a burglar alarm and other security devices?
- Is the actual structure of your house relevant when it comes to setting premiums?
- Does it matter if I don`t live permanently in the house?
- If I take something out of the home, is it covered?
- How much will "special risks" cover?
- What if I'm insured for less than the real replacement value of my home?
- What can I do to protect my property?
- What are my legal obligations when I apply for insurance?
- What are my contents and valuables worth?
Claims
- How hard is it to make a claim?
- Does my claims record matter?
- Do I have to fend for myself while my home is being repaired?
- What do I do if the insurer refuses to pay?
- What are my options if the insurer won't pay?
Complaints and Dispute Resolution
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General
What should I look for in a policy?
For most people, their home is the most expensive possession they will ever buy. So it makes sense that you take the time to carefully consider what your home is worth and what it would cost to replace.
The biggest problem people face with home and contents insurance isn't at this stage of the process. It's when you come to make a claim. So be clear before you start on exactly what it is you want your policy to cover you for. Ask yourself these simple questions:
- What is covered?
- What isn't covered?
- Will the insurer replace items with new goods, or just pay the depreciated value?
Read the full policy wording before making a commitment. If there is anything you are not certain about, seek clarification. Remember, an insurance contract is a legally binding contract.
What types of policies are available?
Defined Events/Listed Events
The most basic household policy will cover you against loss or damage caused by something that has been listed and agreed by the insurer. You will find all the events that you are covered for, are listed in the policy.
Accidental Damage
This is a far more thorough type of policy than a Defined Events policy, in that it will normally cover you against any accidental damage to the structure or contents of your home. Because it is less predictable, an accidental damage policy costs more than a Defined Events policy. Certain events that are not covered are listed in the exclusion section of the policy.
Each of these policies covers the building itself and your household and personal property. Make sure your policy defines "building" and "contents". It should cover you for the cost of repairing damage to the building structure itself. That ranges from the loss of a roof in a hailstorm or windstorm, the damage caused by a falling tree or the impact of a vehicle, to such events as fire or earthquake.
Apart from the structure, the policy should also cover you for such expenses as the replacement of windows, ceilings and floor materials. What else forms the permanent features of your home? Paving, driveways, and pergolas - even the clothesline! Make sure you are also covered if you have an in-ground swimming pool or a garage.
What you are looking for is the amount of money you would need to return your home to its original condition. It doesn't mean the market value of the property. Your policy doesn't cover you for damage to the land your home stands on. And have you considered what it would cost to completely replace your house? That includes demolition, the removal of old building materials and extra expenses like fees for architects and surveyors.
What are the typical features of most home insurance policies?
There are distinctions between policies. For example, while buildings are normally sold with fixtures such as carpets and curtains, these are insured as contents. But items like fixed heaters are included in the building insurance. Let's look at some typical features:
New for old
This simply means that any of your insured property which is stolen or damaged will be replaced by the insurer or repaired. If it's lost or destroyed, the insurer will replace it with a new item of the same type. Some policies put age limits on the replacement, and remember that some items are so old they simply can't be replaced. In that case, make sure you have an accurate assessment of their value.
Indemnity
The amount the insurer will give you for the depreciated value of the item claimed for.
Fusion/Electrical Breakdown
The loss of household electric motors to power surges through the fuse box or a failure in the motor itself is usually covered, as long as the appliance isn't so old that the motor could have fused through being worn out. Check your policy to see what age limit the insurer places on electric motors.
Maximum amount claimable on a single content item
This is the upper limit on the amount you can claim for any one item. If the allowable limited is not high enough to cover one of you content items, then this should be listed as a specified content item. As this can vary from insurer to insurer, you will need to refer to the policy document for this amount.
Valuables covered as part of contents
The insurer will set an upper limit on the value of the items that can be covered under the "Valuables" section. A limit can also be put on the value of a single item under the policy. If the value of an item, or total value is more, you should take out separate valuables cover under your policy with your insurer. The insurer may also place an upper limit on items that it considers to carry a higher than normal risk of loss or damage.
Glass breakage
You would be surprised how often this clause comes in handy! Some insurers have negotiated agreements with glass repair services so their customers have swift access to a repair service. It may add marginally to the cost of your policy, but if you have a lot of glass and a risk factor - like lively children who love playing football or cricket - it's worthwhile having.
Business Contents cover
Most households now have some corner of the home that is used occasionally for business. If you are conducting a full-scale business from your home, you should obtain a home business policy. Business Contents insurance normally places a limit on the amount the insurer will pay out on each item. For example, it's unlikely that a laptop computer used for business purposes in the home could be replaced under the usual business contents cover limit.
Excess
Insurers often require policyholders to pay a set amount of money as your share of the claim. Some insurance companies will negotiate a higher policy excess and reduce the premium accordingly.
Liability
Your insurance policy will contain a section on liability. This is very important, because it protects you as the householder against any claim made by a third party who may have suffered injury or death to themselves, or damage or loss to their property, as a result of your negligence, while they are on your property. For example, if a visitor to your home slips on a wet floor and is injured he or she may have a claim against you. People can sue you for a very wide range of reasons. Australia is now recognised as a very litigious country, so beware! If you're held to be responsible for the event, this form of insurance is the only thing standing between you and possible ruination.
A tip: If someone indicates they're going to sue, don't admit liability. Contact your insurer and let them handle it.
Why do I pay more (or less) for my home insurance than other people?
Insurance premiums are fixed on the risk, and crime levels are different in different places. Usually insurers use postcodes as a guide and use police records and their own insurance claims history for the area to assess the risk. So if you live in an area where theft is more common, your premium will reflect that. Similarly if you live in an area that is prone to such events as cyclones or bushfires, you may also pay more.
Is it worth installing a burglar alarm and other security devices?
No doubt about it. The safer you make your home, the more it should be reflected in your premium.
Is the actual structure of your house relevant when it comes to setting premiums?
A new house is less likely to be damaged than an older house. After all, it will have newer water pipes (so there is less chance of water damage), safer electrical wiring and fittings, and stronger walls and roof. Even the type of material that your home is made of matters. For example, old brick buildings don't stand up to earthquakes very well at all, but they do a lot better in a fire, which is a more common hazard. So a brick home will cost less to insure than a wooden one.
Does it matter if I don`t live permanently in the house?
Yes. If the property isn't your main residence, it is likely to be more expensive to insure. Most policies stipulate 60 days as the maximum period for the house to be vacant. After all, a home vacant for that period of time is much more susceptible to theft and damage.
If I take something out of the home, is it covered?
It can be if you have "special risks" cover. This is normally an optional cover that protects you from loss or damage for contents that you take out of your home. Depending on the policy you purchase this could include such property as jewellery, watches, clothing, musical instruments, cameras - both still and video - and even sporting equipment. (In the case of sporting equipment however, some insurers exclude cover while the equipment is being used). You will need to refer to the policy wording to find out what exactly is covered.
How much will "special risks" cover?
Your insurer will normally list the maximum cost of any one item it is prepared to cover, and how much it will pay out in total for any single loss event. Check to see if your policy has a "specified personal property" or "valuables" section. You will normally be able to negotiate a higher value for personal property under this section. Although of course it will cost you more.
What if I'm insured for less than the real replacement value of my home?
If you lose your entire home through fire or some other catastrophe, you won't be able to replace your home to the same standard with the money the insurer gives you. So it's unwise to be underinsured. But you won't be alone. The Insurance Council of Australia estimates that 43 per cent of home and/or contents are underinsured to a "significant or severe extent".
Some insurers reserve the right to apply a "co-insurance" clause. A simple example is a house that is valued at $100,000 but insured for only $50,000. Most claims under a home policy aren't for the total destruction of the house, but for damage related to specific parts: maybe there has been a fire in the kitchen, or a tree has fallen through the roof. If the damage is $10,000, the insurer may have the right to reduce the value of the claim by the percentage the house is underinsured. In this example, the insurer may only pay out $5,000 of the $10,000 claimed. Check your policy to see if it has a "co-insurance" or "average" clause.
What can I do to protect my property?
Remember that insurance is your last resort. You should do everything you can to protect your home and its contents. Some handy hints:
- Make your property more secure by installing deadlocks on doors and keylocks on the windows.
- Install an alarm system. Burglars hate them; so much so that many insurers will offer a lower premium because you have lowered the risk of loss through theft. Check with your insurer what kind of alarm system is necessary and what effect it will have on your premium.
- Remove potential fire hazards from around the outside of the house as well as inside - particularly around the kitchen.
- Make sure you have working smoke detectors and a suitable fire extinguisher. Put the extinguisher somewhere handy and make sure members of your household know how to use it.
- Mark any personal property that is easy to remove from your home. Examples are your TV, VCR, stereo equipment, cameras, and even your jewellery. Your local Neighbourhood Watch organisation might be able to suggest a suitable engraver or advise where you can hire their equipment.
- Take photographs or video of treasured items around the house like antiques, stamp collections, valuable plates, etc. Complex collections should be carefully catalogued and valued.
- Ensure your jewellery has been specified in the policy proposal and has been valued by a professional valuer.
What are my legal obligations when I apply for insurance?
Once you've found a policy that suits your needs, there are a few legalities you should be aware of.
Duty of disclosure
When you fill in the proposal or renew your policy, you have a "duty of disclosure" to honestly answer any question insurers ask. The insurer can refuse a claim if you don't disclose information that is relevant. Put simply, if the information affects the risk of covering you or your property, tell the insurer before committing to the policy. It's also a good idea to tell the insurer if circumstances change during the period the policy is in force.
Utmost Good Faith
This is the foundation on which every insurance contract is formed, and no matter how sophisticated insurance gets, it's still the basis on which you and the insurer do business. "Utmost good faith" means that both you and the insurer have an obligation to be scrupulously fair and honest to each other. This duty over-rides any other clause in the insurance policy.
Right to refuse cover
After all that hard work, there is the possibility that an insurance company might decline to insure you. Don't just shrug it off if this happens. The company has to tell you why, and it's very important for you to understand why. It may be that the company has decided you don't meet its underwriting guidelines because of where you live, the type of house you live in, or even your age. Either way it's important that you know, because the next insurer will ask and why if you have ever been refused insurance before.
What are my contents and valuables worth?
We have one prediction - you will be amazed at how much you own, and what it's worth! For example, most homes have CD players. But have you ever counted the number of CDs you own? Work out their replacement value and you will see what we mean.
Most people buy at least one or two new household items every year and it's important to keep that in mind when you come to renew your insurance each year. When you have bought an expensive item, it's a good idea to let your insurer know in writing. That way, if a claim has to be made there will be no dispute, because the insurer will have had the opportunity to raise your premium if it's appropriate.
Claims
How hard is it to make a claim?
This is the part most people dread, having heard any number of horror stories about unsympathetic and aggressive claims staff. Once maybe, but it shouldn't happen now. Independent statistics and studies show that the vast majority of claims are paid quickly and efficiently. In fact, Australian insurers pay out more than 80% of every premium dollar in claims. That's the highest claims/premiums ratio in the world.
Don't be deterred if people like clerical staff or assessors tell you that you don't have a claim. If you think you have a legitimate claim under the policy, contact your insurance company immediately and follow that contact up in writing. Insist on any refusal in writing, too. You can follow this simple checklist:
- Notify the police immediately of any loss.
- Contact your insurance company and/or broker.
- Take steps to prevent further damage or loss. · Obtain a claim form and send it in promptly.
- Write down the chain of events that led to the loss.
- List any supporting evidence you may have.
If the claim is for a significant amount you may be visited by a loss assessor, who will report on the damage to the insurer, recommending replacement, a cash settlement or repair.
Does my claims record matter?
Absolutely. For example, you may have made a claim or claims in the past after burglaries. If you haven't done anything to make your home more secure, you're a higher risk than normal. However, if you have installed a home security system or made your home harder to break into with deadlocks, keylocks etc, tell your insurance company. Better still, ask them what you should do to get a lower premium. Don't be deterred because you have had claims in the past - so have millions of other Australians.
Do I have to fend for myself while my home is being repaired?
It depends on your policy conditions. Some home insurers will cover you for the cost of temporary accommodation while your home is being repaired or rebuilt. It can save you thousands of dollars.
What do I do if the insurer refuses to pay?
Firstly, if you have a legitimate claim under your policy it is most unlikely you will have any hassles at all. Up to 2.5 million claims are made in Australia each year, but last year only 2,102 claims were not satisfactorily settled under the industry's acclaimed dispute resolutions system.
Your insurance claim is subject to an industry-wide Code of Practice that is monitored by the Federal Government. Under the Code, insurers must respond to your claim within 15 working days. If there are no complications, you should expect to be paid within a few weeks. In cases of hardship, the payout should be fast-tracked.
Each insurance company has an internal disputes resolutions system. Senior company personnel will review any disputed claim. The company must tell you in writing why it has rejected your claim and advise you of your options.
What are my options if the insurer won't pay?
If you can't reach a satisfactory resolution with your insurance company, they're obligated to refer you to an independent body called Insurance Enquiries and Complaints. This agency acts independently from the insurance industry, and has the power to review your claim and - if it can't negotiate a settlement - impose its own binding decision on the insurer. In the event that you're not happy with the eventual decision, you can still take your case to court or some other form of dispute resolution. The insurer can't.
Complaints and Dispute Resolution
What can I do if I have a complaint or dispute about my insurance broker?
Firstly, you should discuss the problem with your broker or your broker's customer relations officer. It is a requirement of the Insurance Brokers Dispute Facility (IBDF) that participating brokers must have internal procedures for monitoring and resolving disputes - the broker should make a decision about your complaint rapidly, usually within 20 working days.
The IBDF is a free consumer service established by the insurance broking industry to resolve complaints and disputes between insurance brokers and consumers. Most insurance broking firms subscribe to the IBDF, as it is a requirement of their registration to participate in a Government approved consumer complaints handling facility.
If you are still unsatisfied, you should contact the IBDF`s Consumer Relations Manager. If the problem can`t be resolved through a phone call, the Consumer Relations Manager will work on your case. If after 20 working days the case has still not been resolved to your satisfaction, the IBDF Referee will step in.
The Referee is qualified legally and will issue a decision within 20 working days. Brokers must abide by the Referee`s decisions.
To contact IBDF call 1800 064 169 or e-mail ibdf@ozemail.com.au.
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