Insurance ... Sit down when you get your bill

[Token Funder]

The under insurance thing is pretty simple and someone got close a little earlier.

Essentially, if after a loss the insurer works out that you insured only, say, half your stuff, they will essentially pay half of your actual loss.

You have decided to "self-insure" for 50% and they will hold you to it, so:

Stuff worth: $150K
Insured for: $75K
Amount stolen by burglar : $10K
Amount paid by insurers : $5K

Same applies to your building insurance.

 

[wylie]

This has got me quite curious now. I "know" that I could replace everything in my house for what I have it insured for. If an assessor tells me "sorry love, but if you walk into Harvey Norman and replace everything at full price, it will cost you $150K so we consider you are under-insured and will pay you only half of what you insured for, ie. $35K" then basically I am stuffed??

Alternatively, if I decide to over-insure my stuff and chose $200K the assessor is just as likely to say "sorry love, but you have inflated the figure and we now reckon either (a) you probably lit the fire yourself to claim the insurance or (b) you are trying to rip us off by over-insuring" .... and basically I am stuffed??

Anyone know what actually would happen in either scenario?

Just might call my insurer and ask them - straight from the horse's mouth - so to speak.

Tempting though it is to take Tracey's point and just insure our stuff for say $150K and take the cash payment and spend $50K on new "stuff" and pocket the rest, isn't this a bit suspect in the eyes of the insurance company, or don't they care?

As I said earlier, I always over insure the buildings but have been very realistic with my contents. Maybe I need to re-think this. I do know for certain that my insurance cover would enable me to replace what I need (even if it is less than what I have now).

 

[Perp]

This has got me quite curious now. I "know" that I could replace everything in my house for what I have it insured for.

wylie, if you'd be happy with the $60K in case of a total loss, you'll get that, but what you're doing is intentional under-insuring (unless you have a very low frills policy that only covers replacement with secondhand items), and it is considered a form of fraud. Which I know is not your intention! The reason is this: nearly all policies are "new for old" these days. So let's imagine, for example, you have someone steal a TV. The TV would cost $1200 brand new, but you got it for $600 in the Trading Post, or off eBay.

If it's stolen, the insurer will find out how much they cost new, and give you a cheque for $1200. And you're right that they don't care what you do with the $1200; you could choose not to replace the TV at all, if you don't want to. Or you can buy one for $600 and pocket the rest.

When you calculated the value of your contents, you used the figure of $600, and you only paid for $600 worth of insurance for your TV, but the insurance company was actually at risk of having to pay out $1200, because they have a "new for old" policy.

If you consider that over your whole household, if (as I'm assuming) your insurer has a "new for old" policy, what you're doing is asking the insurer to insure all your contents, but really only paying them enough to insure half.

You shouldn't deliberately over- or under-insure; you should provide a good faith estimate of the value of your contents on the same basis as your policy. So if you have a "new for old" policy, you must provide a contents value that reflects their new replacement cost, not what it cost you to buy them from eBay, or what you'd be happy with to replace them all.

If you really want to work on the basis that you describe, then you should seek out an insurer that doesn't have a "new for old" policy, but a "like with like" policy, if they still exist.

Just might call my insurer and ask them - straight from the horse's mouth - so to speak.

Good luck getting to the horse's mouth; it's not the sales person in the call centre who assesses your claim

Tempting though it is to take Tracey's point and just insure our stuff for say $150K and take the cash payment and spend $50K on new "stuff" and pocket the rest, isn't this a bit suspect in the eyes of the insurance company, or don't they care?

If your good faith estimate is that it would realistically cost $150K to replace all your stuff new, and you've paid for a policy with $150K cover, then you're perfectly entitled to take $150K in the case of a total loss and do what you want with it. That's not a fraud, but deliberately under-insuring is

 

[Y33]

Rule Number 1-10 is the same.

1-10: NEVER TRUST INSURANCE COMPANIES.

11: When you get your renewal always check it is identical to what you previously had. Insurance companies like to change little sections without informing you until it is too late.

12: Obtain an independent assessor to check your claim or damage before doing anything.

13: Take as many photos as you can to prove any damage and keep any receipts for expensive items bought previously.

14: If claim is not back ask for the reasons why and follow up, follow up and follow up.

 

[wylie]

This is the point though that annoys me. I am NOT deliberately under-insuring. I am insuring for what I could replace my things for. Every bedroom is built in. In each bedroom we have a bed, bedside table, bookcase type storage, desk and chair. We have two big televisions. We have three living areas, each with a couch, or two, coffee tables, etc.

We have enough sheets for two sets for each bed, and towels and the usual other stuff. Now way known would it reach $100K. And I am being realistic. I am de-cluttering in a big way. I want space in my cupboards. We are slowly and deliberately getting rid of "stuff" that we don't use. We could easily replace what we have for the $70K nominated for our insurance on household items.

Our stuff looks good, in fact, it is good, and I wouldn't want an insurance assessor to assume we had flea market crap, because we don't. It is just that I buy well, and I suppose if we lost it all, it would be tempting to just go to Myer and replace everything full price. But I kind of like our eclectic mix of antiques, old, modern and one-off quirky pieces and would NEVER just go to one or two stores to replace it.

In fact, if we lost it all in a fire I think I would buy beds and the necessities and then start looking for our style of furniture.

In fact, a fair bit of what we have we couldn't replace in "any old store".

On reflection, our insurance coverage is fine, but I will check my policy and if there is any doubt about my cover, I will increase it to cover my backside from the possible downside of a "one size fits all" insurance policy.

I also believe slighty over-insuring on buildings is fine. It used to be better to slightly over insure than find you have under insured, which is a huge mistake, and one which I would never make.

 

[Perp]

This is the point though that annoys me. I am NOT deliberately under-insuring.

Apologies, wylie, I wasn't meaning to make an accusation! If you could replace all your items, on the same basis as your insurance policy, for the amount you have it insured for, then you don't have a problem.

 

[wylie]

No need to apologise Tracey. I do see the problem I might have if we lost everything. I know I could replace everything, but the assessor might have a very different idea, and I would hate to be left out of pocket.

This thread really has me thinking that I need to increase my insurance on the chance that one day we could be caught with our pants down.

We actually switched insurers recently to a company that will cover my jewellery while I am wearing it. The insurer I was with only covered it while it was in the house, so if it was stolen while I slept, I would be covered. However, a much bigger risk would be a ring slipping off a finger while washing my hands in a shopping centre, but if that happened.... too bad, so sad.

I don't skimp on insurance and actually paid $300 extra for a year for this jewellery coverage. When I first looked at this several years ago, the "extra" was nearly $1000 which is just ridiculous. After a few years of insurance, I could buy another ring .

Anyway, this is what SS is about. Thinking outside the square that we live in and I like to think I can be open minded enough to look at things differently if need be.

Cheers.

 

[Pushka]

Hey Wylie, it is things like carpets and curtains that totally eat into the contents. Believe me, when you have a loss, you just want to get everything replaced and back to normal as soon as possible and with minimum fuss.

When we had our claim, we had to use the company that the Insurer said we had to use; so the carpets had to come from one store, the jewellery another store, electricals from another store - we were not given a cheque to do with as we liked. So your cheapie option may not work.

We found that when we increased our cover for contents, things like adding two valuable rings did not change the premium at all. Also, because our fire claim was so obviously legitimate (police and fire brigade were both involved) we didnt lose our no-claim bonus either, yet they had just forked out $10,000!

 

[wylie]

Thanks Pushka. We have only three bedrooms with carpet, and one living room downstairs - the rest is polished floors, and minimal curtains, but I take your point. I think I need to have a re-think of this.

I would be curious to know who you insured with who didn't add any premium for the rings. I have done some shopping around over the years and the jewellery seems to be a bit of a problem with many companies.

My insurer now doesn't add anything for them, but the policy itself was $300 more than similar cover with my old insurer and they are covered anywhere, any time, so I thought that was worth $300. It does mean though that my contents is diminished by the value of the jewellery and in the case of total loss, this could also be a problem for us.

Anyway, I certainly plan to check it out again.

 

[Pushka]

Hey Wylie, we are with SGIC which is South Australian, but it is under the AIG umbrella.

 

[wylie]

Thanks Pushka. I have only just changed, but will put a note in my file to check them out for next year.