The perils of under-insurance

We have all heard of customers being told that they are under-insured only when they make a claim, by which time it is too late. In some cases of under-insurance the company will refuse to pay a penny. In others, it will only pay a proportion of the claim.

In November 2012, Carol and Patrick Warren woke up to find the ground floor of their Somerset house submerged in rainwater. A devastating flood left the Warren family homeless and their possessions destroyed. However, the £127,900 needed to pay for the damage and rent for alternative accommodation was not covered by their insurer, as the family of four had thought.

The insurer agreed to pay just half this sum, on the grounds that the Warrens had failed to provide an accurate value for the property – despite the fact that the family used the valuation calculator recommended by the insurer.

Unknown to the Warrens, the calculator was completely unsuitable for their circumstances. It considered only properties with up to four bedrooms, whereas their home had six, and did not consider that the house was Grade II listed. The insurer offered the Warrens just £55,000 – less than half the cost of the damage.

The insurer’s loss adjuster claimed that the Warrens were “confused” over the cost of the damage and required money “wholly disproportionate” to the actual cost. Fortunately for the Warrens, the official dispute resolution body, the Financial Ombudsman Service, sympathised with the family’s plight and intervened in summer 2014. The Ombudsman deemed the insurer responsible for the property being under-insured, and ordered the full claim to be paid, with 8% interest added.

Different types of car insurance in Ireland

Car insurance in Ireland is about protecting other road users, as opposed to protecting the driver of the insured vehicle. Car insurance is not an optional extra. It’s a legal requirement to have car insurance if you want to drive your car in a public place. Failure to have a current Certificate of Insurance when driving is a serious offence. You will incur fines, penalty points and you may be disqualified from driving.

Young drivers are considered a high risk for insurers, and the cost of car insurance in this age group is considerably higher than for others both in Ireland. However, young drivers can reduce the cost of car insurance by joining a parent’s insurance as a named driver. This will enable the young driver to establish a safety record, which is crucial when the young driver later applies for insurance in their own name.

  • The most basic insurance – “third party” – is the minimum required by law. However, this insurance leaves you open to substantial loss in the event of an accident. If you are at fault, only your passengers and the driver and passengers of the other vehicle will be compensated. Third party insurance provides no cover for damage sustained in an accident to your car or if your car is stolen or goes on fire.
  • Comprehensive insurance is the most expensive type of car insurance, and covers you for almost every eventuality: any damage done to the vehicle regardless of how it was incurred; life/accident insurance; loss of personal belongings from the car; the cost of a hired car if the insured car is off the road as a result of an accident; windscreen breakage, etc. New cars in particular should be comprehensively insured.
  • Third party, fire and theft is the most popular form of car insurance in Ireland. This covers you for loss of the vehicle through fire or theft and for any loss as a result of attempted fire or theft. Damage to property is also covered. There are also optional extras available such as windscreen breakage.

Under Non-Life Insurance Regulations, your car insurance company must issue your insurance renewal notice not less than 15 working days before the date of expiry of your insurance policy. It is also required to include with the notice your no claims discount certificate. You will need this certificate if you want to renew your car insurance with a different insurance company.

Why are we building homes on flood plains?

In the UK, almost half of the areas fast-tracked for new housing in the UK are on floodplains. To make matters worse, many policy experts claim that Flood Re, the UK government’s scheme designed to mitigate high insurance costs for tenants and homeowners at risk of flooding, will only apply to the 1-2% of properties most at risk of flooding.

The situation in Ireland is not much better. The Cabinet has agreed a number of flood mitigation measures – including a mix of heavy engineering and dredging, additional pumps and more walls – to help control flooding along the Shannon and elsewhere. But it is questionable whether this latest investment will have any lasting impact. For example, while large-scale dredging to deepen river channels might improve things in the short and medium term, many engineers question long-term sustainability. The Shannon is very flat and flows slowly except during flooding, and is therefore not a suitable candidate for large-scale dredging.

Various flood mitigation options are being discussed. Engineers warn that focusing on one point on a river catchment may simply move the problem down- or upstream to cause flooding elsewhere. Urban flooding can be controlled by heavy engineering, including walls and embankments, but water flow upstream may be slowed, causing river levels to rise. Contained water may increase water flows arriving in downstream towns and villages. Flooding bogs and using them as reservoirs to lower river levels sounds like a good idea, but bogs would fill very rapidly if a river was in full flood. Once the bog reached its capacity, it could hold no more.

Experts claim that a small amount of planning and a relatively minor investment could have given those living along the Shannon 10 days’ warning that flooding was on the way. Met Éireann delivers highly accurate predictions looking four to five days ahead. Even after the heavy rains in Storm Desmond were forecast, it took another four or five days before rivers reached crisis levels and heavy flooding hit. People living in known at-risk areas could have had 8-10 days to prepare.

As in the UK, flooding in Ireland is less about water and more about poor planning. And like in the UK, Ireland continues to build housing, roads and services on river flood plains, even though many of these houses can never be adequately protected from floods. The obvious alternative of moving homes to higher ground is expensive, and carries a high emotional and financial cost. At the same time, the risk of flooding is more imminent in light of the severe weather produced by climate change.

Ireland’s latest round of flooding has shown again that we are unlikely in the long run to hold back the flood. Instead of promising us quick fixes, the government would be better advised to place greater emphasis on better planning.

Of course, these discussion about flood mitigation measures fail to address another burning issue: is it right that people who live in flood-prone areas should be unable to secure home insurance? Irish insurers are cracking down on offering flood cover to properties in flood areas, leaving many Irish homeowners having to foot the bill for the damage themselves. If figures published by industry group Insurance Ireland are correct, about 2% of Irish home insurance policies exclude flood cover. In other words, a staggering 50,000 properties in Ireland’s flood-risk areas are unable to get flood risk cover.

The real question is: how will the Irish government address this?

Tips on insuring your high-tech gadgets

Hi-tech gadgets are part of our everyday life. We regularly carry with us a combination of different gadgets: mobile phones, tablets, laptops, cameras, iPods and Kindles. It is not unusual to have up to €1,000 worth of gadgets with us on a daily basis.

Because these gadgets are portable, they are also vulnerable to theft, damage and loss. So the first question you need to ask is: Can I do without my gadgets? And can I afford to replace them? If the answer is no, it is worth considering gadget insurance options.

Before taking out dedicated gadget insurance cover, you need to do your homework. Does your home insurance offer sufficient cover for gadgets? Are your gadgets already covered through warranty, travel insurance, bank account or credit card?

The first thing you should do is carefully study your existing home contents insurance cover. You need to know what protection it offers, and you need to consider the potential impact of a claim for a gadget on your home insurance no-claims bonus. Many home insurance policies offer you the option of specifying which gadgets you want to insure. Take cell phones as an example. According to independent financial researcher Defaqto, over 300 home insurance policies in the UK provide cover for mobile phones within the home as standard.

Also, check the terms of any warranty you may have on your gadgets. For example, many people take out specialist gadget cover from a retailer when they buy their hi-tech device. Mobile phone insurance has become almost standard. Just remember that this might not be the best or most cost-effective option to take.

Sometimes, purchases made by a premium credit card or packaged bank account are also covered by a special warranty. While it may seem like a good idea to have extra protection for your gadgets, doubling up on insurance is not to your advantage. Also, carefully check your travel insurance terms to see whether they include gadgets – and which ones.

Be aware that in the event of a claim, insurers usually apply a ‘single article limit’ to items, including gadgets. This is the maximum amount an insurer will pay for an item, and this may differ between item types as well as between insurers. You need to decide whether you want to include accidental damage cover for your gadgets – and make sure you read the small print so that you know precisely how the insurer defines “accidental.”

Check the excess charged by your home insurer. If the excess is greater than the value of your gadget, it may be worth paying for a replacement yourself. Remember that cover for personal belongings in a car is typically only found on fully comprehensive policies, and tends to offer rather limited payouts.

For many people, the most valuable thing about their gadget is not the gadget itself – it’s the data stored on it. The trick is to regularly back up your data, music, photos, files, contacts and other information. The cloud offers a sure way of protecting your data, while physical back-ups such as home computers and detachable hard discs can also help you ensure that the loss of the gadget does not mean the loss of valuable data.