Your home insurance documents will clearly explain the procedure that you are required to follow if you wish to make a claim. Typically, you should telephone your insurance provider's claims helpline as soon as you realise that you need to make a claim. This number is given in the policy booklet, which you should receive when you take out the insurance.
Calling your insurer gives you the opportunity to discuss your claim with a customer service advisor, who can answer any questions you may have and inform you as to whether your claim is valid or not. You will be required to give certain information over the phone to confirm your claim, such as your policy number, a crime reference number (if appropriate) and the estimate of the cost of the damage or loss.
If you are not claiming for a large amount, your insurer may settle your claim immediately. For larger claims which cover a bigger loss or a greater amount of damage, your insurer will usually arrange a representative or 'loss adjuster' to inspect your property. This gives your insurer the opportunity to confirm the damage or loss and repairs required. Most insurers have several specialists who can replace damaged items quickly and / or carry out any necessary repair work.
As long as you filled out your home insurance application form completely and honestly, your claim is usually settled quickly. If you lied on your application form however, your insurer may invalidate your claim and cancel your policy.
Before a claim is settled, your insurer will ask that you pay the excess agreed in your policy. The excess is the part of a claim which you must pay yourself. This is a set amount of money which varies between insurers and policies: typically, the excess is between two hundred and five hundred dollars: see also Excess.
Settling Your Claim
If you make a claim for anything covered by the buildings insurance component of your home insurance policy, your insurer will settle your claim by paying the cost of repairing, rebuilding or replacing the part of your property which was damaged, as long as the damage was caused by an incident covered by your policy.
If you make a claim for anything covered under the contents insurance component of your home insurance policy, your insurer will settle your claim by:
> Paying the cost of replacing the item as new; or
> Replacing the item as new; or
> Paying the cost of repairing the item; or
> Offering you a cash payment equal to or less than the cost of repairing or replacing the item
as long as the damage or loss resulted from an incident covered by your policy.
In some cases, you may be able to replace an item with an upgraded model. In this case, you would be expected to pay the difference between the cost of the old model and the new one.
Your home insurance will only insure items up to a specific value, typically $1,500 or $3,000. If you have any high-value items, these must be declared separately when you take out the insurance, so that you are entitled to reclaim the full value of the item should you need to make a claim.
The total amount of cover provided by the insurance policy (the sum insured) will not usually be reduced as a result of a claim, but there may be some restrictions if your claim is very large. Your insurer may insist that you install certain security features, such as an alarm system or window locks, if your property was broken into and this resulted in a large amount of damage or loss. In addition, they may decide to increase your premium if you renew your home insurance policy with them when your existing policy expires. This is especially true if your premium had previously been reduced due to a no claim bonus: if you make a claim, this discount is typically no longer valid when the policy is renewed.
Claim Conditions
Your policy documentation will outline exactly what your insurer expects from you if you wish to claim. Ensure you follow the correct procedure, so that your claim is processed as quickly and efficiently as possible. For example, you are usually requested to inform your insurer as soon as you need to make a claim. In addition, if you make a claim for damage to, or loss of a high-value item, you should be able to provide receipts, valuations and/or photos to prove its value.
When you make a claim, your insurer will ask for any additional information you can provide. For this reason it is important to note down the details of the incident which led to your claim. In addition, you should aim to keep original documents such as receipts, invoices, instruction manuals and/or photographic evidence that help confirm the value, make and model of an item for which you are claiming. This evidence should also confirm the date when you purchased the item, and the supplier from which you bought it. If someone broke into your property you should inform the police. The police will provide you with a crime reference number, which helps ensure that your claim is processed as soon as possible by your insurer.
What happens if you are under-insured?
If the sum insured is lower than the cost of your claim, you are under-insured. This situation occurs if the cost of rebuilding your house is greater than the maximum amount that your insurance provider has agreed to pay out, for example. If you make a claim and find you are under-insured, your insurer may only pay the reduced amount. Some insurers may however take a more sympathetic view. If you have made an effort to keep them informed of a change in your circumstances, for example a new extension that you have built, they might even decide to honour the full amount of your claim.
However, some insurers will reduce the amount you can claim by the same percentage by which you are under-insured. This is because they consider you failed to tell them the honest value of your property, and should probably have been paying higher premiums. For example, if the cost of rebuilding your house is estimated to be $200,000, but your sum insured is just $150,000, you are under-insured by twenty-five percent. If you make a claim for fifty thousand dollars' worth of repairs, your insurer can refuse to pay the full amount, and reduce the value of your claim by the percentage by which you are under-insured:
$50,000 – (25% of $50,000 = $12,500) = $37,500
Your insurance provider will agree to pay thirty-seven thousand five hundred pounds, and you will need to pay the remaining twelve thousand five hundred dollars. Ensure that you inform your insurer if your circumstances change and your sum insured no longer meets your needs: this should avoid expensive disagreements with your insurer if you make a claim in the future.
