Insurance is an evil industry. It never ceases to amaze me
when yet another insurance policy is invented to protect the unsuspecting
public from ridiculous events that are extremely unlikely to occur. I know this
sounds pretty negative but when you ask just about anybody who has had to deal
with an insurance company, they will be just as cynical as I am. Now I’m not
saying to abandon all of your insurance policies, as some are warranted and can
protect you from horrible, unforseen events, what I’m saying is, you need to do
a hell of a lot of research before signing up. Before I get started, let me
just tell you what the number 1 thing that you ALWAYS need to ask before
considering a new insurance policy, “What’s not included?”.
This is something that is almost always overlooked by people
seeking an insurance cover. Insurers produce exhaustive lists of what is
covered but rarely, if ever, list what is not included. This just means that
unless your loss occurs due to one of the items on the list, you are not covered
at all. Your cover is always more inclusive when the insurer produces a list of
what’s not covered in your policy.
Below are some more common traps:
Under insurance –
there is a clause in most modern policies which states “This type of clause
requires you to bear a proportion of each loss or claim if the sum insured is
inadequate to cover the full potential loss. In effect, you are taken to have
self-insured a proportion of the risk, because you have not insured the full
value of the risk.”
So, for example, you bought a house for $300,000 ten years
ago and insured it for its replacement value at the time ($300,000). Fast
forward to today, property prices have risen, you’ve done some upgrades on the
property but have left the insured amount at the same level due to laziness or
being comfortable in knowing that you’ll at least get $300,000 should something
unforseen happens.
In a horrible turn of events, your house is burned down. You
go to your insurer and make a claim for the $300,000, although your house is
now worth $500,000. The above clause means that your maximum claim will be:
$300,000/$500,000 x
$300,000 = $180,000
In summary, you should review your insurance cover every
couple of years but make sure that you don’t over-insure as this won’t provide
you with any extra cover. It’ll just mean you pay higher premiums for no good
reason.
Insure ASAP –
When you enter into a contract for the purchase of a property, you’re instantly
liable for the property. To avoid entering into a hasty, long-term insurance
contract, you can take out interim insurance with most insurers. If for some
reason you can’t take out an insurance policy upon signing the contract, you
can put a clause in the contract that will pass all liability to the seller
until settlement. I would suggest contacting a solicitor to get the correct
wording of such a clause.
Two Policies – A common question by a seller usually arises when a
contract is signed. “Should I now cancel my policy as the buyer is now
responsible for the property?” The answer is no. You never know what kind of
policy a buyer has taken out and whether or not everything has been disclosed.
If something goes wrong and the buyer’s insurer cancels the policy, your
property is in effect not insured at all.
------------------------------------------------------------------------------------------------------------
Disclaimer: By viewing and using this website, you acknowledge that it is for informational purposes only and does not imply any contractual agreement, promises of returns or legal expertise. All investors should consult with legal representation and appropriate accountants before making any investment and should ensure that individual due diligence is done. Any information provided here is for educational purposes only and should not be taken as financial advice.
No comments:
Post a Comment