Christchurch Earthquake Claims: Insurance Company Obligations

In the week since the devastating earthquake, the people of Canterbury are still coming to grips with the enormity of the event.  However, it is encouraging to see people starting to look forward, and think about the way ahead.

Part of that, of course, is insurance.  The modern concept of property insurance grew largely out of the fire of London in 1666.  Now, almost 350 years later, we have seen what insurance is all about.  Insurance is not really about claims for lost glasses or broken windows.  We have insurance to protect us against catastrophes such as what happened last week.  Insurance is there to help you to overcome the serious financial consequences of such a catastrophe.

Anecdotal information coming from a smarting insurance industry is that the type and size of claims in this earthquake will dwarf the September event.  Whilst there was widespread devastation in September, there appears to be much more in the way of total destruction, and more contents losses.

So if you have insurance for your house, contents, car, farm or business, what should you do?

It's difficult to plan too far ahead at this early stage.  But it may pay to start thinking about some of the following:

1. Start with your policy.  That's the record of what you are covered for. Don't take for granted what you're told should be covered, or your insurance company's word for what is covered.  Read your policy.   If yours is lost or destroyed ask for a copy.  You might be surprised what cover you have.  For instance:
   1. stress benefit of up to $10,000 when the house is destroyed
   2. cover for temporary accommodation costs
   3. cover for accommodation costs for your pets
   4. a cash benefit if someone has died in the house
   5. temporary storage costs for your contents
   6. rental car costs in a car policy
   7. Automatic cover for small watercraft or trailers under contents or car policies

And then there's the add ons

This is just a start.  Insurance companies compete with each other by providing all sorts of add-ons.  You have been paying for all these add-ons, so now is the time to claim for them.  Read your policy and see what you can claim for.  It's unlikely that your insurance company will point these out for you.  You need to ask.

2. If you're in a dire financial situation, don't be afraid to ask whether the insurance company might give you a cash advance of part of your claim entitlement.  If they are satisfied that your house is totalled, many insurance companies will pay you an upfront amount for immediate needs.
3. Even if you don't have a business policy, many domestic contents policies provide a small amount of cover for business assets.
4. If you have a rental property than most good policies will cover some loss of rent.  No reason why you can't ask for this to be paid straight away to help with income flow, or even a lump sum is the house is a total loss.
5. If you're in a body corporate, contact the body corporate secretary to see what cover there is for the building and what you might be able to claim for.
6. If your house is badly damaged, and you are starting on the clean up process, make sure you don't pre-emptively throw everything out.  Your insurance company may want to see property before paying and so at the very least make detailed records of what you throw out and photograph valuables.  Imagine trying to remember everything you had, after it's all been thrown away.  Don't rush to throw everything out.  Contact your insurance company for guidance first.
7. Insurance companies will drag in significant temporary and potentially less experienced staff to deal with the huge amount of claims.  So if you are talking to someone from the insurance company make sure you get the person's first and last name and make a note of the time, date and details of the call.  That way if there is any dispute about what was said you have a date, time and name to refer to.
8. Start collating proof.  If your records are lost you can start to collect from banks finance companies and card companies records of payments and ownership.  Start to think of who might have these records and get the ball rolling now.  That will speed things up when you come to claim.
9. Remember that your contents policy will probably cover all of your family living with you.  So if you have extended family, their stuff may be covered too.
10. Check what is covered for replacement and what is covered for second hand value.  Most good policies these days provide replacement cover for many items including some electronic items.
11. Is your house policy a replacement policy?  If so is the cover limited to a maximum sum insured or is there no monetary limit to the cover.  Some contents policies have no limit to cover.  Every single item is covered, regardless of how much the total is.

After the September earthquake I discussed, the need to resist premature cash settlements.  The same applies now more than ever.  Builders will be in short supply and costs high.

If you are offered a cash settlement to repair or replace your house, be very careful before you accept it. If necessary get a second opinion.  Don't be prematurely shoe horned into a cash settlement.  And in any case, before signing a discharge, read your policy to be sure there's nothing you've forgotten to claim for.

And finally, don't be tempted to guild the lily.  Even in times of crisis, the insurance companies are aware of fraud.  If you try to claim for something that wasn't lost, or exaggerate your claim in any way, you'll lose the lot.

Don't give the insurance company a reason to decline your claim.