When you think about claims, people generally jump to their own worst fear of their property burning to the ground, and that’s exactly why we all buy insurance. Big marketing hypes insurance products as providing ‘peace of mind’, but what you’re literally purchasing is compensation in the event you submit a claim – and a reasonable expectation that any such claim will be processed and paid to you. What do you need to know about claims when it comes to your property insurance?
Don’t sweat the small stuff
Claims are there for the major events – think fire, earthquake, storm damage – but also the slightly smaller but still very costly incidents such as a leaking pipe that damages flooring that your tenant didn’t notice. Insurance isn’t there for the day-to-day maintenance of a property, so don’t use your policy for repairs, ware and tear, and upkeep, as your insurer may deny those types of claims.
What about damage and the new legislation amendments?
The recent amendments to the Residential Tenancies Act provide that a tenant is liable to pay their landlord’s insurance excess or four weeks’ rent – whichever is lesser – but only for careless or intentional damage. Accidental damage, such as spilling a glass of red wine onto fluffy white carpet, may still be the responsibility of the landlord; further Government guidance and future Tenancy Tribunal decisions will provide more certainty on this.
A snapshot of Initio’s last 12 months of rental property claims shows that unexpected events such as house fires and storms take the lion’s share of the number and value of claims:
|Type of claim||Number of claims||Cost of claims|
|Accidental loss (e.g. storm damage, fire, burst pipe)||55%||70%|
|Accidental damage caused by tenants||14%||5%|
|Careless damage caused by tenants||7%||1%|
|Intentional damage caused by tenants (including meth)||16%||23%|
|Other/third party claims||8%||1%|
What types of claims are the most common?
As the insurance provider to over $2.5 billion of Kiwi property, Initio has its fair share of claims – so based on our experience, we can give you an insider’s view on what to look out for. In the last 12 months to end of August 2019, our 4 most common claims in order:
#1 Sudden water leak (eg burst pipe) – average claim value $5,916
#2 Tennant damage (eg malicious damage) – average claim value $2,960
#3 Weather damage (eg storm, flood) – average claim value $5,732
#4 Hidden gradual water damage (eg slow dripping pipe) – average claim value $1,980
The best insurance of all is the proactive management of the risks faced by the property. For example actively keeping an eye on areas where hidden leaks are most likely to occur (under the kitchen sink and in the bathroom) will reduce the likelihood of damage. But should you get hit with a nasty loss – well, that’s exactly what insurance is for.
Many customers seem to think that they must leave their water sodden carpet festering away until the insurance assessor turns up or their insurer says it can be taken out. This is definitely not the case. My advice is to act and to start the clean-up process; take photos and get on with things. It is important to note that most insurers want you to take steps to reduce any further loss, and taken action aligns with this. The exception here is fire damage, following a fire you will want to take steps to secure the property (eg. boarding up entry doors) but you should leave the property as is so that fire investigators have the best chance of determining the origin of the fire.
Know the process
The process around submitting and receiving payment for claims can be frustrating if you don’t know how long you’ll be kept waiting, and what is required of you as a claimant. So, when choosing an insurer it’s good to take the time to understand this upfront – so if and when you suffer a loss, you know what to expect and can have confidence in the process.
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