Making an insurance claim is stressful enough at the best of times, but it’s even worse if you don’t end up with the full amount you’re claiming for. Unfortunately, all kinds of pitfalls await the unwary, and these are two of them.
Damage Mitigation
Suppose you’ve been burgled. You find your door broken in and your most valuable possessions gone. You’d call the police, naturally, but would you then go off to work without bothering to get your door repaired enough to lock it?
Of course you wouldn’t, but it does happen, and anyone behaving like that is creating serious problems for themselves.
Damage mitigation is an important principle in both law and insurance claims. It means that, if you’ve suffered loss, you must take “reasonable action” to prevent further loss, otherwise either the courts or the insurance company’s Loss Adjuster can refuse to compensate you.
This isn’t bloody-mindedness. If, for example, you were to go straight out after a break-in and leave your home unsecured, it would be impossible to prove what had been taken in the original burglary and what had gone as a result of your negligence. In those circumstances, the Loss Adjuster might be justified in refusing to pay any of your claim.
The same applies if you leave your home or business premises at risk after a fire or flood, rather than undertaking essential structural work at the earliest possible opportunity. Damage mitigation is vital if your insurance claim is going to succeed — as well as being common sense.
How Can a Loss Assessor Help with Damage Mitigation?
There are many reasons why it’s vital to appoint a Loss Assessor as soon as you know you’ll be making an insurance claim, and damage mitigation is one of the most important.
A Loss Assessor will always work for you to get the compensation due to you — after all, they don’t get paid if you don’t. But it’s no good having a Loss Assessor if you’ve already failed to meet your damage mitigation obligations.
If you appoint a Loss Assessor at once, they’ll be able to see what needs to be done straight away, such as emergency work to prevent further damage to your property, and arrange for it to be done. They’ll also undertake a thorough survey of the damage, which can be used to support your claim for the losses you’ve suffered.
Appointing a Loss Assessor at the earliest opportunity could make the difference between success and failure in your insurance claim.
Insurance Policies and the Average Clause
We hate it when anyone loses out on their insurance claim. During a single fortnight recently, two Policyholders we’re acquainted with lost large amounts — and the cause in both cases was the Average Clause in the Insurance Policy.
These people had £50,000 and £135,000 docked from their pay-outs — and not because the Loss Adjuster was being at all devious. It was because they hadn’t realised they needed to keep their policies up to date over the years, in particular updating the value of their properties. They’d simply renewed the policy as if the value hadn’t changed.
This is where the Average Clause comes in.
When you insure your assets, such as your home, one of the pieces of information you supply to the Insurer is the “insurance value”. This becomes the sum insured under your policy and the basis for calculating your Insurance Premium.
If the insurance value on your policy is lower than the actual value when you come to make an insurance claim, you won’t have paid enough on your premiums to cover the full value. Not unreasonably, Insurers are unwilling to cover the extra costs.
The Condition of Average
The Condition of Average is inserted into insurance policies to protect Insurers from this situation. Put most simply, it says that, for instance, if you’ve only declared 50% of the insurance value, you’ve only paid 50% of the premiums and the Loss Adjuster will thus only allow 50% of your claim.
To take an example, if the insurance policy covering a building is for £50,000 and the actual insurance value at the time of loss is £100,000, the proportion of Average will be just 50%. That means that, whether the loss is minor or total, you’ll only receive 50% of any claim you make.
In this situation, if you were claiming £50,000, with an excess of £250, the calculation would be:
- 50% Average of a £50,000 claim = £25,000
- Less policy excess of £250 = £24,750 pay-out
- Total loss on £50,000 claim = £25,250
A loss of this size could be devastating, so if you’re unsure whether you’re up to date under the Average Clause, consult your insurance broker as soon as possible. Or you’re very welcome to get in touch with us for a chat about it.
Disclaimer
All content within this column is provided for general information only, and should not be treated as a substitute for the Insurance advice of your own broker or any other Insurance professional. Allied Claims is not responsible or liable for any decisions made by a user based on the content of this site.
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Blog originally published here.