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Why Insure?

Some fifty years ago when I was working for a major life insurance company, I believed that I could do better and applied for other jobs within the insurance world. One of these resulted in my driving to Southampton for an interview with the Manager of the Crown life branch. I spent about one and a half hours with him and during the first hour he reduced me to a state of nervous wreck. Then for the last thirty minutes he helped me put myself back together so that I left more confident than when I had entered his office.

Yes, he offered me a job, which I turned down, but he taught me one thing that has stayed with me. He asked “Why do people insure their lives?” I trotted out the standard answer “protection for family”. “Agreed but why protect the family?”

It was rather like pulling teeth but we eventually got around to the simple word that he was seeking “Love”. If you love someone then you naturally want to protect them against any hardship. The biggest hardship is lack of money. Therefore, if you have a mortgage, in the event of your death you would like to believe that the mortgage will be cleared. So, you insure yourself for the amount of the mortgage, possibly on a joint life basis. You may even go further and insure your life so that if you should die your family will not suffer financially.

That, conveniently brings me to insuring the house. When buying a house, you need to appreciate that once contracts have been exchanged you are bound to complete the purchase, even if the house is not still standing. Thus, at that point you must ensure that the house is properly insured.

It is very unusual for anything to happen to a property between exchange of contracts and completion but once it did happen to a client of mine when there was a fire at the premises between exchange and completion. Fortunately, the property was insured at the time of the fire.

But why insure it? Because, in the event of damage to the property you want to feel that it can be repaired or replaced, so you seek cover against most eventualities. Similarly, with the contents of your house, you insure against lose or damage. Unfortunately there are some events that can happen to property or possessions that are not covered, such as rot or frost damage, considered as gradually operating causes which although you cannot see them happening until too late are considered ‘maintenance’ risks which are not insurable. If you read your policy, you will note that you do undertake to maintain your property in a good state of repair.

All insurers want to pay claims but they wish to identify the particular ‘insured peril’ that gives rise to the claim. Therefore, although the claim may be for the rectification of dry rot, the cause of the rot was water damage over a long period. That claim can be rejected on the basis of dry rot being specifically excluded and the water damage occurring over a long period and therefore was a gradually operating cause and could be considered to be the result of poor maintenance. That is whether the water damage was visible or not before it gave rise to dry rot.

This is where an insurance broker may be able to assist in explaining where, within the policy wording the insurer includes or excludes individual covers so that you can better understand the reasoning behind insurers decision to accept or decline a claim.

Another point for discussion is ‘When is subsidence not subsidence?’ When a property starts to show signs of deterioration in the fabric of the building it may just be ‘drying out’ particularly if it is a new property. Hairline cracks may appear in corners. It could be movement which many properties will suffer over decades without being a problem, mostly hairline cracks. Or it can be subsidence where the foundations of the building are actually giving way allowing the building to move to a point where there is visible evidence of the building becoming unstable, sinking or twisting.

It is important that if one of these events occurs you want to know if you can claim. Talk to your insurer or your insurance broker to get an explanation of the wording of your policy.

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