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The Protection of Buildings and Contents Insurance

You might have watched it aghast on the television news, you might even have lived in a street where fire ravaged a neighbouring house. The fact is that catastrophic accidents may happen to anyone’s home, destroying both the fabric and its contents in one major disaster. Furthermore, fire is just one of the perils covered by buildings and contents insurance, which – depending on the policy chosen – may typically also protect the owner against such risks as flooding, damage caused by water or oil leaking from burst pipes or tanks, storms, subsidence, vandalism, riots, falling trees, aerials or satellite dishes, and even impact damage caused by vehicles or animals.

The protection offered by building and contents insurance, therefore, may cover a valuable home and all of its contents against a huge range of risks.

  • How much cover do I need? – the amount of cover needed is likely, of course, to depend on the value of the property and its contents. This might seem completely self-evident and a simple matter of common sense. It is surprising, though, that some home owners are either under- or over-insured when it comes to buildings and contents insurance. The problem often stems from the way in which the valuation of the building and contents has been made and the need to take into account the actual cost of rebuilding from scratch or replacing lost or damaged contents;
  • Re-building and replacement – in matters of insurance, it is generally prudent to take the worst case scenario. Specifically, in this case, that means the total destruction of the insured buildings and their contents (fires, floods, and other calamitous events may not be widespread, but neither are they that uncommon). The insurance cover, therefore, may need to be sufficient to rebuild the destroyed property and to replace the lost or damaged contents.

Rebuilding costs, of course, are unlikely to be the same as the price at which the home was bought (especially if that was a number of years ago) and is likely exclude the price of the land on which re-building needs to be done. Professional valuations of those rebuilding costs as time goes by, therefore, may prove sensible.

Similarly, the valuation of the home’s contents also needs to be realistic and kept up-to-date. When considering contents insurance, it may be important to recognise that some forms of cover are restricted to compensation based on a “fair wear and tear” basis, so that the compensation in the event of a claim diminishes over the years as the insured items become older, whilst other buildings and contents insurance packages provide for the actual replacement of lost or damaged possessions. In either event, however, it is important that the whole of the insured contents are accurately valued, since any under-estimate may result in your receiving only partial compensation in the event of a claim;

  • Additional features – the market in home buildings and contents insurance is keenly competitive and some insurers offer more extensive and wider ranging cover than others. Some of the additional features which it may be worth considering, therefore, include those that cover the cost of alternative accommodation (in the event that the insured building becomes uninhabitable until rebuilding or refurbishment), the contents of any sheds or outbuildings, together with garden plants and furniture, and cover for any business equipment that may be kept or used in the home.

Buildings and Contents Insurance – The Basics

Many people consider buildings and contents insurance to be one of the basic safeguards for any property owner, be it a residential dwelling or commercial property. And quite rightly so, since the insurance is designed to protect probably your biggest single investment. Without it, the property owner is decidedly vulnerable to some potentially catastrophic risks.

Just as the name suggests, however, buildings and contents insurance is in fact two insurance policies – one covering the fabric and structural integrity of the building, the other covering its contents. The two policies can be bought separately, or, as is often the case, rolled up into a single policy, when discounts are often sometimes on offer for buying the two together. What, then, are the principal risks typically covered by this kind of insurance?

Buildings insurance

Despite the common saying that something is as “safe as houses”, our homes are in fact vulnerable to the sort of major disasters that damage the property so severely that they are uninhabitable without very expensive repairs or even rebuilding. This is the sort of damage likely to be practically impossible to fund from your own resources, unless you have the protection of buildings insurance. Although policies differ from insurer to insurer, a home insurance typically covers the following basic risks:

  • fire;
  • storm damage;
  • floods;
  • subsidence;
  • falling branches or trees;
  • objects falling from aeroplanes;
  • impacts by vehicles; and
  • sometimes vandalism or malicious damage.

Further types of damage might or might not be covered by a standard buildings policy. For example, leakage of water or oil from pipes that burst in freezing weather might be included in some policies. Also included in some standard policies or as an optional extra is cover for accidental damage to fixtures such as bathroom or kitchen fittings. Cover for some types of damage – such as subsidence and flooding – moreover, might depend on whether you had accurately advised the insurer of the potential risks beforehand.

For these purposes, the building surveyor which you ought to have commissioned before purchasing the property might again come in useful for alerting your insurer to potential problems, thus ensuring that buildings and contents insurance cover remains as extensive as you believed it to be.

Contents insurance

The other half of the basic pair of home insurances is designed to safeguard the contents. Typically, this is also a considerable investment – that might take more than you are able to pay if you had to replace all the items, following a fire, say.

Because the contents of the typical home are built up over many years, however, many people might be surprised at just how valuable those contents are.

The following are some of the points you might wish to consider before arranging your contents insurance:

  • Unlike your buildings insurance, your mortgage lender is not going to insist on your having the contents of your home covered, but a careful inventory (on a room-by-room basis) of the contents of your home is soon likely to reveal the enormous cost of replacing it all if it were all to go up in smoke or damaged by flooding;
  • The typical contents insurance policy is likely to offer compensation in the event of any loss or damage in terms of the replacement value (i.e. at today’s prices) of the items lost, damaged or stolen. It is possible to find policies with cheaper premiums that pay out after a deduction for “wear and tear” of the items that need replacing according to their age, but this means, of course, that you are unlikely to receive enough to replace them at today’s values;
  • There are many variations in the extent of cover offered by one contents insurance policy compared with another. It is important, therefore, carefully to read the policy document to understand just what risks are covered and to what amount.

Buildings and contents insurance might be one of the most basic safeguards available to any property owner, but it might prove to have been invaluable, in the wake of the sort of disaster that ruins the fabric of a building or requires the replacement of all, or a large proportion, of its contents.

Insurance Appraisers – Property Appraisals and Estimates

In this article, we’re going to look at how the value of a property claim is determined. This could relate to your real estate property or your personal property, such as your automobile or the contents of your home.

Before we go any further…remember this statement:

THERE IS NOTHING IN YOUR POLICY THAT REQUIRES YOU TO GET MORE THAN ONE ESTIMATE.

Many times, you’ll hear an adjuster recommend that you get three estimates. That’s just not necessary, and wastes your time and money. That procedure had everything to do with price, but has almost nothing to do with quality and value. Your home or your property is not a commodity…a mere rubber stamp of every other piece of property. It should not be treated like a commodity. Don’t let an adjuster get away with this.

Here’s another statement to remember:

AN ESTIMATE IS AN APPROXIMATE COST OF REPAIR OR REPLACEMENT OF PROPERTY. IT IS NOT ETCHED IN STONE. IT IS NOT A CONTRACT TO REPAIR OR REPLACE PROPERTY.

Automobile Damage Appraisals

If your loss is an automobile loss, and your vehicle is damaged, YOU seize the initiative and take your vehicle to the body shop of YOUR CHOICE. It would be best to have your vehicle inspected by the insurance company appraiser and your chosen body shop appraiser at the same time. That way, they can agree on the scope of damages before they start calculating the repair costs.

Read your policy. Some insurance companies actually specify in their policy that you must take your vehicle for repairs to the insurance companies “Approved Vendor.” But most policies do not. However, most insurance companies will try hard to direct you to their “Approved Body Shop Vendor.”

Just remember this. Is the “Approved Vendor” on your side or on the insurance company’s side? Did that body shop make a special deal with you to repair your vehicle? NO! So, just who do you think that “Approved Vendor” is going to be loyal to?

The insurance companies make deals with body shops so the repairs will get done at a reduced price. That usually means cutting corners on quality and using inferior aftermarket parts. You do understand that a car can look great from the outside after repairs, and not be the same car you had before the accident?

You must insist that your body shop appraiser write an estimate using Original Equipment Manufacturer (OEM) parts instead of aftermarket parts. Don’t give in on this point, or you’ll be compromising your safety in that vehicle after it’s repaired.

Once you have an OEM estimate from your chosen body shop, you’ll compare it with the insurance company appraiser’s estimate. You’ll likely find that your estimate is higher in price than the insurer’s estimate. Negotiate from YOUR ESTIMATE, not the insurer’s estimate. Once you’ve gotten agreement on the scope of damages and the amount of repairs, you’re ready to settle that part of the loss.

Don’t sign off on the release until the repairs are completed and you have done and extensive test drive and inspection of the repairs. Once you’re satisfied, then you can consider signing off. Have your attorney review the form before you sign it.

Homeowners and Renters Appraisals

In a homeowners insurance loss, in which the dwelling itself is damaged, the claims adjuster will inspect the dwelling for damage. He will photograph the damage and take measurements. He will make notes of all of the damaged items, and note the quality of the building materials. He will note the cause of the damage, if it can be readily determined. All of that information is commonly referred to as the “Scope of Damages.”

You must get a restoration contractor of your own to inspect the damages and write an estimate. Don’t just accept the estimate of the claims adjuster.

It would be a good idea to have your contractor meet you and the adjuster at your home at the time of the inspection. That way, you can all look over the damage, and you, the adjuster and the contractor can agree on the scope.

There should be an agreement between you, the policyholder, the contractor, and the adjuster on the scope of damages. Likely, you won’t have a chance to accept the adjuster’s scope until he takes the information from his inspection back to the office and enters that information into his estimating software in his computer. Most adjusters will be able to print a copy of the scope and send it to you. You should insist on a written scope of damages from the adjuster.

Don’t sign anything without having your attorney review it FIRST.

Adjusters are human and sometimes miss damages. So do contractors. That’s why there should be an agreement on the scope of damages…before you ever begin discussing the cost of repairs.

Think about it another way. Let’s say you are going to build a new house. Your architect would have to make drawings and specifications of all of the materials that were going to be used to build that house. When it comes time to get bids from contractors, everyone bidding has the same information upon which to base their bid.

It’s no different when you’re getting bids and estimates in an insurance claim.

Once you have the scope of damages, you can then expect to receive the estimate from your contractor and the adjuster. The best way to handle this is to insist that the contractor and adjuster reach an agreement on the amount of the estimate. Once that’s done, the adjuster can report to the insurance company and have them pay the claim.

Contents, or Unscheduled Personal Property

Get a copy of a JC Penney catalog. Better yet, get two…one Fall/Winter, one Spring/Summer. Get your hands on as many other catalogs as you can find. As you look at the pages of the catalogs, you’ll remember the things that you had in your home. You will find hundreds or thousands of dollars in personal property that you likely would not have remembered owning. Not only will you remember dozens and dozens of items, but you’ll have a retail price from a reputable retailer right at your fingertips.

Please don’t misunderstand what I’m telling you to do here. I’m NOT telling you to write down items on your inventory list that you did not own. That’s fraud, and you can go to jail for fraud. I’m simply showing you a way to remind yourself of things long ago purchased, and possibly stored and forgotten. For example, how many parents bought a vaporizer to run in their children’s rooms at night when the young children were sick? That vaporizer might not have been used in years, but you owned it, and you have a right to collect for it under the terms of your policy.

When you have completed the Contents Inventory Worksheets, make copies and submit the copies to the claims adjuster.

In closing, remember this. All insurance claims adjusters and appraisers use estimating software these days. This software is a vast database of materials and labor for any kind of property. But many companies make a deal with the software designers to write software that undervalues the repair costs for the property. Consequently, when the appraiser uses that software, estimates for repair are consistently lower than the actual costs. That’s why you need your own estimates.

Take control of your insurance claims! Add hundreds or even thousands more dollars to your claim settlements!