While many pay for insurance premiums with the intention of receiving compensation for their losses in times of crisis, George Newhouse from Shine Lawyers says investors may be disappointed at the compensation that comes back.
“Unfortunately, some policies define flood in different ways, and some policies have caps on payments for flood damage,” Mr Newhouse explains.
“Many people are unaware that their insurance policies may not cover floods and even when they do cover floods, they may be subject to strict dollar limits.”
Investors need to carefully examine the policies to ensure that they include appropriate flood cover to appropriate limits.
So your property has flooded - what should you do?
Savvy investors should always prepare for the worst.
“They should keep their insurance policies and schedules in a safe place, away from the insured property so that they can have access to those documents in a time of crisis,” Mr Newhouse advises.
“Investors should also take photographs of their property in preparation for a loss, and also keep any plans, engineering drawings, and reports that relate to their property in a safe place.”
To make a claim, investor should provide as much information as they can to their insurer about the damage to the property, and critical documents which can maximise their claim.
They should also:
• Take fresh pictures of the loss
• Notify the insurer of the damage
• Ask for an assessor to come out and inspect the property
• Make sure they understand what is covered by the policy
Investors who own a property in a strata plan should also ensure that their strata manager has obtained appropriate insurance for their building.
Where investors slip up
Never mind that insurance companies don’t always cover the loss. Many investors don’t always claim for each loss that’s covered under their policy.
“[Investors] need to understand all the risks that are covered in the policy, and ensure that they claim for each of them. If they don’t, an insurer would normally not make any payments unless a claim has been made,” Mr Newhouse advises.
“For example, [investors may] make a claim for repairs to a building but not for the loss of rent.”
Another area that investors tend to slip up is when they accept the advice of their insurer when they can obtain more in terms of replacement costs or indemnity costs than what they’re being offered.
“They either accept that their claim is denied because it doesn’t come within their policy terms or they will accept an amount which is less than what they are entitled to under their policy.”
In many cases, investors are paid less than what they’re entitled to due to the lack of evidence to support a higher claim, Mr Newhouse continues, outlining one example.
“In many crisis situations, insurance assessors would just apply a per square metre rate when calculating the value of the rate. Experienced loss adjustors can increase the amount payable by the insurer by obtaining extra reports including the use of a quantity surveyor.
“By doing that, the insured or the investor can increase their payout by proving that the actual damage or [prove that] the actual replacement cost is much higher than the estimate provided by the insurer’s loss assessors.”
Many people may also not realise that they’re entitled to the costs of preparing a report or even their lawyer fees in preparing a claim.
Investors should seek expert advice if they’re in doubt, he says.