Safe As Houses
Understanding 'Under-Insurance' Is The First Step In Protecting Your Biggest Asset.
Understanding 'Under-Insurance' Is The First Step In Protecting Your Biggest Asset.
"Consider this .... If you went out to dinner and returned home to find your house had burned down, would your insurance cover the cost of replacing it? Or have you carried out renovations recently but failed to increase your cover?
Now, with a free guide to protecting your greatest asset, you can check if you're fully covered.
Many victims of the Victorian bushfires, already traumatized by the magnitude of the disaster, now face the bleak prospect of not being able to replace their home and belongings because they weren't adequately insured.
Your level of cover should be based on the cost of replacing your home and belongings, not the market value or purchase price. But we understand assessing building costs and the replacement value of every single item in the home, can be daunting."
The above is an exert from an article by 'MyState Financial', who in conjunction with Australia's largest insurer CGU, are noted as making 'it easy' to estimate building & contents cover, with a step by step guide. The exert of the article was taken from 'MyState Financial's July 2009 Magazine', sent out to policy holders.
Now whilst we think all methods of removing under-insurance from policies are a great idea. It is obvious that some methods, no matter how many times being re-badged, relaunched, rewritten, etc. are just not working! And how do we come to that conclusion? Well, after a major Disaster, we hear time and time again about Under-Insured Homes! If the solutions which have been around for the last five years are working, then surely there would be little under-insurance!
As we see it, areas that could be improved offering better help and creating action, in the battle with Under-Insurance are:
- Increasing the questions to the householder, confirming that the removal of debris, demolition costs and rebuilding fees have been taken into account when estimating the value of the home. We contacted a few Australian Insurance Suppliers, and were never asked such questions on a new policy.
- Not writing a policy until the values submitted are known by as many means as possible to be accurate & true! At present Insurance policies are churned out on the premise, that the householder has taken the above factors into account.
- Questions regarding renovations, decoration, new purchases, etc. could be asked at renewal time! We have never been asked such questions!
- One big problem, is householders think the Insurer has everything under control! Householders especially in the 40+ age range. From our experience, it is like a belief that there is a large 'Crystal Ball' in the Insurers office. This mindset may be from when years ago, Insurers would make out that everything was 100% under control! There was no need to worry! Of course nowadays that kind of mindset has changed, or has it not?
When we question households about under-insurance, at first we are told it not present. After a few more questions and scenarios, the householder is too often aware, they could be under-insured and may have been for a long time! Up to now, they just assumed everything would be fine! All under control by the large Insurance Company. It is only with luck, they have not as yet made a claim!
The next step of taking inventory in cases such as this, usually results in Under-Insurance!
The householder is not a trained Insurance valuer! Better guidance and questions from the Insurance Company is needed at policy creation and policy renewal! If the same attention to detail was supplied at policy creation, as when the loss adjuster knocks on the door, policies would be a lot more accurate. Unfortunately where a system that has built in errors, at the expense of the policy holders, you would question the 'good faith' that is being offered by the large Insurance Companies.
YES, the present Insurance system can be improved! Inventories of property and contents before loss, make commonsense. A record of property can be easily forwarded after theft or during claim time. If kept up to date, an inventory of property makes the recovery after loss, a lot easier. And there is less work for all concerned parties, which would reduce workloads, costs and hopefully reduce the cost of policies. As we all know inaccurate policies create more work and thus will only raise the cost of insurance.
Surely if an Insurance Company wanting to make sure it's policy holders have 100% accurate policies, it is not too hard to make sure they 'take inventory'. Offer discounts, inform them of services that will take inventory for them. Do not write a policy until the inventory is supplied!
YES Insurance Guides are a good idea, but what % of your clients use them? If an Insurer is caring for it's policy holders like they say they are, they should go 100% in making sure all accounts are accurate. Remember the present system is not eliminating under-insurance! The system needs to change!
Articles such as the above, have been released after Disaster's too many times already! The above article simply shows again that what is being offered, has failed before! Confirmed by the present number of under-insured homes in Australia. It is not always the householder who should be blaimed for under-insurance, but maybe the Insurer for issuing policy's that are open to inaccuracies, due to basic questions / records / documentation not being asked for and produced, before the policy is written.
Our advice to you the householder is, Record & Document! Compute the value of what you now see listed in the inventory. We will be suprised, if you are not under-insured. Most of our clients are time and time again. There are no Crystal Balls - The only person who knows 100%, what your assets are worth is you the householder. Every other system involves guesswork that will cost you $$$ at the time of making a claim. Under-insurance only shows at claim time, unless you go looking for it! It is the termite of the Insurance World!
Realising you MAY BE Under-Insured and MAKING SURE YOU ARE NOT, is your first step in protecting your biggest asset!
We often say "Until you prove you are not under-insured, we will assume you are! - How does that make you feel? What would you choose to do without, when it is not replaced by your Insurance Claim!"
