If there is even the slightest discrepancy in the information that the policyholder has provided, the insurer will be well within it’s right to reject any claim that is raised under the policy.
Homeowner’s insurance is cover for your home (the building, not the contents). Remember that the insured value is not what you could get if you sold your property; it is for the cost of replacing or rebuilding your home at today’s values.
Listed are some of the reasons claims are rejected.
A peril you are not covered for caused the loss. If your loss was the result of “gradual deterioration” and “maintenance” issues, you are not covered. Homeowner’s insurance typically covers you for storm and fire damage.
Poor design and faulty workmanship. These are usually not covered.
Retaining walls not built to acceptable standards. Retaining walls have to be built according to engineering specifications. Therefore, if a landscaper, and not an engineer built your retaining wall and it collapses, your insurer might not pay out.
Subsidence. If your house is built on clay, cover for subsidence is “normally excluded”,
Unoccupied premises. If you leave your home unoccupied for, say, 30 days, without advising your insurer, it could have grounds to repudiate a claim.
Moveable’s are not covered. There are often disputes over what is a fixture, which is immovable, and what is a moveable item. Homeowner’s insurance covers you for permanent fixtures only.
Most claims for contents cover are rejected on the basis of the average clause as policyholders tend to under-insure.
Inflated and fraudulent claims, this is a big problem in the industry. Do not inflate your claims. Most policies carry a forfeiture clause, so if you are caught out, you may have to forfeit all benefits under the policy. In other words, the insurer is entitled to repudiate the entire claim.
As a policyholder, you need to understand some general principles of insurance. Dennis Jooste, an Ombudsman, says. These are:
Utmost good faith. “Insurance is based on utmost good faith. When you enter into a contract with an insurer, you are asking the insurer to assume the risks that we all face in our everyday lives. The insurer knows nothing about you. Your premium is going to be determined by the insurer based on your risk profile. This is where utmost faith comes in.”
Full disclosure. “In assessing your risk profile, the insurer relies on you to make full disclosure of all material information,” Jooste says. “This is why it’s so important that you are honest when you take out insurance and maintain this honesty throughout your relationship with the insurer. Otherwise, come claims stage, the insurer may say, ‘but you didn’t disclose that fact to me and therefore I couldn’t assess the risk properly’.” Also bear in mind that insurers share information, he says. The consequences of material non-disclosure at application stage is that your policy becomes “voidable”, resulting in you having no cover when it comes to light that you did not make full disclosure.
Insurable interest. You can’t insure something in which you don’t have an interest. “If you own something, you have ‘an interest’,” says Jooste. “For example, when adult children move back home and bring with them their own assets, which they don’t bother to insure, problems arise. They assume their assets will be covered by their parents’ insurer. The bad news is they are not covered by dad’s insurance, because dad doesn’t have an insurable interest in the property.”
The “average” clause. This requires that you insure your assets at their full value. If the sum insured at the time of the loss is less than the insurable value of the property, the amount claimed will be reduced in proportion to the under-insurance. Jooste says most people don’t have adequate cover for their household contents and don’t realise the consequences of this. If you have household contents to the value of R800 000, which you have insured for R500,000, and you suffer a R100 000 loss, you might think you’re adequately insured. Not so, he says. Your insurer can penalise you for being under-insured and can pay you out in terms of the “average”. “In this case, it may pay you out five-eighths of R100 000. That’s how average works,” he says. Jooste says it’s important to revalue your assets annually to ensure you have sufficient cover.
Enforceable contract. The policy is an enforceable contract subject to its terms and conditions, and any ambiguities in the policy will be interpreted against the insurer, Jooste says.
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