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Insurance Claims for Flood Victims

Thursday, 29 April 2010

Your home is one of your most valuable assets and although home insurance is not compulsory, it is advisable to take out a policy to insure your home and belongings against unavoidable events that you have no control over.

Ireland has had one of the worst winters in years, with rain, snow and floods affecting hundreds of families around the country.

Last November saw hundreds of families put out of their homes just before Christmas as their homes and businesses were damaged by floods.

Now these families face new woes as their home insurance premiums rise by up to 300% and they are refused new policies when they come up for renewal.

Liam Croke is in studio with some advice and guidance about home insurance.


Liam Croke: Money Expert

Liam has worked in the financial services industry for the past 21 years and seen by many as an expert in the field of personal finance. He is a qualified financial and mortgage advisor.

In the past he has held senior management positions with two well known financial institutions along with one of the "top 5" accountancy practices in Ireland.
Liam gives his advice and wisdom on a daily basis to those who are just starting out to high net worth individuals. He currently works for a financial services company based in Limerick.

He is frequently asked to contribute and comment in all areas relating to personal finance on both national and local radio stations. You will have heard him for example recently on RTE's "The Mooney Show" and on Newstalk's "The Right Hook."
Liam was invited to make a presentation to the Joint Oireachtas Committee on Social & Family Affairs on trends and levels of personal debt in Ireland. He made his presentation to the committee on the 24th June 2009.

Liam is author of 4 personal finance books:

. The best selling The Mortgage Maze Explained published by Currach Press in 2006.
. The best selling book Your Money Your Life - Managing your finances in today's Ireland published in 2007.
. I'm Broke! A teenagers guide to Money - Published by Crabtree and distributed in the UK & USA in 2009
. Stash or Splash which is being released in Ireland and the UK in September of this year.

. Liam previously wrote a weekly personal finance column for The Sunday World entitled Mr. Cash - How to Save it, Spend it, Earn it and has also written articles for the Sunday Business Post, the Evening Echo, the Sunday Independent, the Irish Sun, Prudence Magazine to mention just a few.


Home Insurance Coverage

Home insurance is the single most important investment most consumers make after the purchase of their home. A home insurance policy can protect their home, possessions, and liability. When entering the world of home insurance it can be difficult and overwhelming to shop around for the best deals available. There are different types of insurance, different types of coverage, and different considerations for every family. Therefore, it is critical to understand the inner workings of the home insurance industry.

Why is it so necessary?

Simply because it gives you peace of mind, knowing that if anything was to happen to your house or contents that they can be replaced and rebuilt from the proceeds of your insurance policy.

It is also a legal requirement for those who have mortgages as a lender will insist that the property is adequately insured in the event of anything happening the property which they obviously have an interest in.

What does home insurance cover?

It covers four main areas which are:

. Damage to the structure of your property
. Damage or theft to your contents
. Loss or damage to valuables
. Injury to people in your home i.e. public liability

Subject to conditions, exclusions and excesses on your policy, below is a sample of what could be covered in your policy:

Covers Household Insurance

Fire, explosion, lightning and earthquake Yes
Storm or flood Yes
Water or oil leaks Yes
Impact by aircraft, rail or road vehicle or animal Yes
Falling aerials, masts, satellite dishes, trees or branches Yes
Smoke Yes
Subsidence or heave or landslip Yes
Breaking of glass Yes
Architect's Surveyor's and legal fees & debris removal Yes
Service pipes and cables Yes
Alternative accommodation/loss of rent Yes
Fire brigade charges Yes
Liability to the Public Yes
Liability to domestic Employees Yes
Title Deeds Yes

It is very important to read your current policy document and check and see exactly what you are covered for, don't assume you are covered for something in particular and when it comes to making a claim you are not!

What is 'All risks cover'?

This is an optional form of cover on your household policy that covers valuable items lost, damaged or stolen whilst inside or outside your home.

Specified all risks cover allows you to note specific items of value that you want to cover on your all risks policy.

What should I insure my property for?

Many people make the mistake of insuring their property for the market value of their house which is the price they would achieve if the property was sold on the open market. This is incorrect and they could end of paying far too much each year as they are over insured.

You have got to insure your property based upon it's reinstatement value and this is the amount an insurance company would pay out to rebuild it to its former state.

Given what has happened over the past couple of years with property values reducing but more importantly building costs reducing the amount your house needs to be insured for could have reduced significantly.

If we go back to 2007 the rebuilding cost for a 3 bed terraced property in Dublin would have been at €191 per sq ft. Now based on a property with a typical size of 1,023 then this would give you a rebuilding cost of €195,393.

Now in 2010 the rebuilding cost for the same property has come down to €171 per sq ft giving a rebuilding cost of €174,933 so if someone has not looked at their home insurance schedule for the past 3 years they are paying more than they need to!

2007
For a semi-detached, 3 bedroom, 1023 sq ft house:

Dublin Cork Galway Waterford Limerick

€199 sq ft €145 sq ft €144 sq ft €147 sq ft €153 sq ft

2010
For a semi-detached, 3 bedroom, 1023 sq ft house:

Dublin Cork Galway Waterford Limerick
€177 sq ft €137 sq ft €133sq ft €135 sq ft €137 sq ft

So, you can see that there is a big difference between what you could be and should be insuring your house for!


What percentage do people need to pay themselves?

This depends on their excess which varies depending on your policy.

Excess: The excess is the amount of each claim that you will have to pay for yourself. You can often get a discount on your premium if you agree to a higher excess. Consider whether the savings you would make is worth it, as you will not be able to claim for losses that are less than your excess.


What affects my premium?

The amount you pay for your home insurance premium will be affected by:

. The re-instatement value of your home
. Where your home is
. The type of property
. The amount of discounts you can get
. The amount of excess on your policy
. No claims history
. Do you want accidental damage cover or not
. The amount you want to cover your contents for
. The amount of specified cover you want i.e. jewellery

Discounts that apply to your premium can be significant and can be as much as:

Discount type Discount value
50 years of age or over 15%
Voluntary excess 10%
Centrally monitored burglar alarm 25%
Burglar alarm 10%
Smoke alarm 5%

If we take an example of someone living in Dublin 8 and they want to insure their property for €200,000 with 10% contents worth of cover but they have no smoke alarm or burglar alarm then their premiums would be about €300 per year.

However, if they had a smoke and burglar alarm then their premium would reduce to c. €256 per year or if one of the persons insured on the policy was over 50 then the premium would go down to about €225 per year.

Let's take a look at this example again and if someone is living in Dublin 8 and they want to insure their property for €200,000 with 10% contents worth of cover but they have no smoke alarm or burglar alarm then their premiums would be about €300 per year. But, if they made one or two claims in the past 3 years then their premium would increase to about €375 pa.

How do I make a claim?

1. Call your insurer asap - they usually have a free emergency helpline
2. Give a brief detail of the claim and request a claim form
3. Your insurer will tell you the steps you need to take next

Assessor:

You may want to hire an assessor, especially for larger claims. They work on your behalf to assess the cost of the damage or loss and will often negotiate with the insurance company on your behalf. Your insurance company will not pay for the work the assessor does, so you will have to pay for this service.

Common mistakes and reasons why a claim may be refused:

. The damage is not covered by your policy
. You did not report a burglary to the guards
. The damage was caused by wear and tear
. Your burglary alarm was not on


If your claim is refused, your insurance company must write to you to explain the reasons for the refusal.

The Dos and Don'ts

Do:

. Maintain and upgrade your home fire and smoke detectors, burglar alarms and dead bolt locks as they could cut as much as 30% off your premium
. A home inventory - experts says that one of the most difficult parts of the claims process is recalling lost or stolen items. Catalog your belongings, including receipts with video or photographs. Keep copies of vital documents in a fireproof safe, with your solicitor or someone you trust
. Shop around for home insurance - ask friends, check on-line, or look into getting an insurance broker to find the best deals for you
. Look at your premiums if you have your home and car insurance with the same provider - they may offer discounts for having the two together
. Consider raising your policy excess - the higher the excess the more money you can save on your premium
. Always take time to review your insurance policy to see you are adequately protected

Don't:

. Rely on the purchase or estimated sale price of your home to use as the amount you should insure your home for
. Be penny wise and pound foolish by buying the lowest priced policy if it doesn't provide you with the level of cover you need. Your home is your bigeest asset, make sure it is covered.
. Underestimate your personal possessions - you will be surprise how much it costs to replace what you had if you suffer a major loss
. Be afraid to switch insurers to get a better policy

Home Insurance for Flooding

Insurance Claims after flood damage - What are your rights?

Home damaged in a flash flood

Many areas that are not generally prone to floods were affected last year due to the uncommon weather conditions. In these cases the insurance companies are likely to pay for the damages and also insure you for future flooding risks if the flood is a one-off occurrence due to the severe weather or if it was caused by a preventable incident such as a broken pipe etc.

However, this can still affect your premium and excess.
When you renew your home insurance your premium may increase dramatically.
If you had a no-claims bonus your premium could be increased considerably.
After a large claim has been made your insurer could increase the excess on your policy

Home damaged in a known flood area

If you live in a known flood area then you may still be able to claim for damages. Usually it is easier to receive an insurance payment if you have been with the same company for a number of years and if you have never made a previous claim. It is better to pay for small damages yourself and use your claim for more extensive damages. Once you have made a claim your insurance company may refuse to cover you for damages causes by flooding in the future. Switching to a new insurer may not be advisable as they may decide not to cover you for flood damages as you are living in a high risk area.

Home damaged in an area that has just become prone to flooding

Last November a lot of houses were affected by extreme flooding for the first time in the areas history. If this is the case the insurance company will usually cover the cost of the damages. However if your home is flooded in the future the insurance company may not cover you for this damage and you will have to pay the costs yourself. Again your premium is likely to increase dramatically on renewal.

Home damaged in an area that has defences against flooding

If you live in an area highly susceptible to flooding but you put preventative mechanisms in place you may be able to get flood coverage from your insurer.

For more information please contact the financial regulator:

Consumer help-line Lo Call 1890 77 77 77

consumerinfo@financialregulator.ie

Drop in: 6-8 College Green, Dublin 2

www.itsyourmoney.ie

www.citizensinformation.ie

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