Why it pays to read the fine print ...
The world is your oyster. You are young, gainfully employed, and the bank has just approved the finance for your very first home. Exciting times! It feels like your life is headed in the right direction.
Sound familiar?
It’s a story familiar to many “young people” (which, when buying a home, applies to anyone between the ages of 25 and 45).
Yes, life is rosy and you’re desperate to sign the paperwork so you can move into your brand new digs, but it’s imperative that you pay attention to your home and contents insurance.
One of the biggest rookie errors I see is that first home buyers too often purchase the cheapest insurance policy available.
I get it. I was in the same boat. In a world of skyrocketing prices, we need to consider the cost of all purchases, and our insurance is no different.
Don’t be fooled into thinking that your home and contents policy covers all situations and circumstances, as it probably doesn’t!
I have personally represented many people who have purchased home insurance, only to discover that their policy has an exemption or an exclusion clause which prevents them from bringing a claim.
Now this sounds problematic, but it shouldn’t keep you up at night. Or should it?
Consider this scenario. You have owned your house for five years and have said yes to your partner’s wedding proposal. Next summer holidays, you’ll be walking down the aisle to say “I do”, with your two kids beside you.
As a pre-wedding celebration, your family and friends come around for a barbecue, and the kids play under the sprinkler until the sun goes down. At sunset, the marshmallows come out and the guests gather around a toasty warm fire to enjoy a glass of wine and a cheese platter under the stars.
Unfortunately, your brother can’t seem to light the fire with his cigarette lighter, so he heads to the kitchen and pours a drop of methylated spirits into a cup to use as a fire starter. He gently throws the contents of the cup onto the pile of wood and has another go at lighting the fire.
The fire ignites quickly, and the wind blows the flame directly onto one of the guests. Her dress goes up in flames and she is badly burned, requiring urgent medical attention and hospitalisation. Skin grafts are also undertaken on her arms and legs.
At this stage, the situation is viewed as an unfortunate “accident”.
What should you do? First and foremost, you should let your insurer know, as she might bring a claim.
This is a true story,
and in this situation the guest did make a claim against the homeowner. In an unexpected twist, the claim was rejected under an exclusion clause as the incident was caused using an accelerant (the methylated spirits).
The injured guest was a landscape gardener who could no longer work outside due to the skin grafts on her arms. She required extensive protective clothing and had to apply medicinal creams daily.
This claim was worth more than $150,000 in damages.
And, you guessed it, the owners of the home were personally liable.
The owners initially had to consider bankruptcy. Instead, they refinanced their home, cancelled the big wedding and had their marriage registered at the Births, Deaths and Marriages Office (no ceremony). Their plans to send their kids to private school went out the window. They had the same car for more than 10 years after the claim settled.
Importantly, these homeowners were good upstanding citizens; educated, employed and honest members of the community. They had done everything (at least in their minds) to protect themselves and their children from any risks. They created wills and Powers of Attorney when they purchased their home. They paid their bills on time and never missed a mortgage repayment.
Lesson 1: These people are you and I (yes, I am talking about your home insurance policy).
Lesson 2: All insurance policies have exclusion and/or exemption clauses.
Lesson 3: Do yourself a favour. When obtaining home and contents insurance, ask your insurer for a copy of the products disclosure statement (PDS) as well as a copy of the Policy Deed.
Lesson 4: Check (read) the PDS to see what you are covered for, then check the list of exemptions/exclusions. If any of these are concerning to you, refer to the part of the Policy Deed that relates to the specific concern or the relevant exemption/exclusion clause.
Yes, it could be time to health check your insurance policy. Just remember that this process won’t necessarily guarantee a “perfect policy”, as insurers don’t extend insurance to cover absolutely everything.
By checking your policy before you buy, you will at least be aware of your coverage, and you can make an informed decision about whether a policy is right for you. Best of luck shopping around and remember, the cheapest isn’t always the best …
Connect with an Ipswich legal firm that has been lighting the way for over 80 years.
Connect with Josh: Click Image
