Most of us give little thought to our insurance from week to week. We hope that we never need to use our insurance. If the day comes where we do then we expect our insurer to treat us fairly and to provide a good claims service.
For our insurance to work as we wish when we need it, it’s crucial that we arrange it on the correct basis. We’re going to look briefly at the policyholder’s responsibility to ensure that sums insured are adequate.
The Claims Process
Doomsday scenario: Your house burns to the ground and all of your household possessions are destroyed. You make a claim to your home insurer.
You expect your insurer to deal with the claim and to put you back in the position you were in before the loss occurred: to rebuild your house and replace all of the lost possessions. For this to take place, the sums insured on your Buildings and Contents must be adequate. In other words, the sum insured on buildings must match your homes’ Reinstatement Value.
The reinstatement value is the total sum you would have to pay to rebuild your home from scratch in the event of its loss. It is the combined cost of:
- rebuilding your home
- site clearance
- architects’, surveyors’ and engineers’ fees and compliance with building or other regulations.
How much should you insure your buildings and contents for? You can find advice on the Allianz Ireland website.
Your insurer will assign a loss adjuster to investigate your claim; they will assess the rebuilding cost of your property and the total replacement cost of your contents at the time of the loss. They will also assess whether or not the sums insured were adequate.
What happens if sums insured are not adequate? That depends on the terms of the insurance policy. The norm is for insurers to calculate the extent to which you were underinsured and to treat you as the insurer of the shortfall.
Say your buildings were insured for €150,000. The loss adjuster’s assessment is that the rebuilding cost is actually €200,000. Therefore, you were underinsured by €50,000, which is 25% of the estimated rebuilding cost. The insurer will proceed to handle the claim on the basis that they will pay for 75% of its cost and you will pay for the remainder.
Having those insurance policies should provide peace of mind. Please take care to ensure that your insurances are arranged and maintained accurately.