As a new bill to change insurance policies may be passed through the House of Lords by March 2015, some people are feeling a little bit confused about it, so we are going to try and clear it up.
The bill is basically about an insurer’s responsibility in assessing an individual’s circumstances before they can take out an insurance policy. This is to protect both the insurance company and the individual from ending up at a financial loss.
When you take out an insurance policy with UKinsuranceNET, like any insurance broker, we ask a lot of questions about the property and the insured. This is so we can get a clear understanding of any risks that may affect the building, its ownership and the risks either moral or hazard associated with the property.
If we don’t understand all of the risks, and not all of the information is willingly disclosed at the time of application, then it may be that your insurance company would be entitled to decline the claim stating that it would not have accepted the risk if they had it been made fully aware of the facts and therefore should not be expected to pay you for any damage.
For example, if you have a 20 foot tree outside your home, you will be expected to disclose this if asked and possibly pay more for your insurance because your house is at more risk of being damaged or destroyed if the tree should cause damage during a storm by collapsing on the house.
However if you hadn’t told us about that tree and it had fallen onto your home, your insurance company wasn’t aware of that risk and they cannot be expected to pay for the damages.
It is understandable that people want to pay lower premiums, however it’s pretty pointless to take out a policy that isn’t going to give you peace of mind and may not be of any use in the event of a disaster.
The new law will mean that customers and insurers will have to undergo two tests before they can take out an insurance policy. Firstly, very similar to the current law, the individual must disclose any circumstances which could put the property at a higher risk.
Unoccupied- An unoccupied property is more at risk of vandalism or broken, burst pipes that could cause damage.
Rivers- The closer your home is too a river, watercourse, canal or sea then the more likely you are to experience a flood.
Trees- Trees and their branches can cause significant damage to a property in a storm. In addition to which they can also be the cause of subsidence at a property and cause damage to underground drains and services.
Commercial- These properties are usually left unoccupied during the night and thieves would expect goods and other valuable items to be left inside.
Security- If your doors and windows including patio or French doors do not have sufficient locks, your home is at more risk of a burglary.
Tenants- It is better for your tenant to have a steady, regular income so that you are guaranteed your rent payments. There are many different types of tenants including students, retired, unemployed etc., and most insurers need to know the type of tenant you have in a rented property as they will rate the risk differently. Likewise different tenants present a different risk with other products for example Rent Guarantee Insurance.
Secondly, the insurer must make it clear what poses as a risk to the property. The questions asked of the customer must be more thorough to ensure they have a clear understanding of the contract and that if any risks aren’t disclosed, then the insurance company cannot be held responsible for meeting the cost of damage.
Another change to the law will mean that commercial property owners will only have to disclose information on a “know or ought to know” basis.
This means that an insurance company cannot refuse to pay a claim if the individual did not know of the risk. However, an underwriter can detail exactly what the customer must disclose to counteract any false claims which are defended by the notion that they simply did not know.
Many disputes between insurers and insured can end up in in court with the insurance company being accused of ‘data dumping’. Basically customers assume that their contracts are full of jargon and excuses so that the insurance company won’t ever have to pay for their losses.
The new law will mean that the court will have to decide whether an individual purposefully withheld information that could put their property at a higher risk to reduce their premium thereby saving them money. In the event of a deliberate breach of contract, the insurance company will be able to avoid the contract and refuse to pay any claims. Technically this is called ab initio which means cancelled from policy inception.
You should always be sure you have the correct insurance to cover your property. Try and disclose the information you feel is relevant to both the risk and the question being asked.
The fact is, the more risks that affect your property, then usually the premiums are higher as this is the main way your insurance provider can cover the costs.
The alternative would be to exclude the risk, say if the property is in a known flood area, or there is evidence of previous subsidence at the property, the option would be to remove this element of cover and proceed with a reasonable premium. This means that you can be covered for anything other than the high risk circumstance which puts your premiums at such a high cost.
If you want to have your home properly covered, you will have to pay the proper prices. We provide specialist insurance cover for those with difficult circumstances. UKinsuranceNET works with some of the UK’s top insurers to get you the most appropriate cover in even the most difficult circumstances.
We have a lot more advice on insurance and your policy in our blog. You may also like to read Law Changes in Energy Efficiency. You can keep up with our latest posts and updates by following UKinsuranceNET on Facebook and Twitter.