The Council of Queensland Insurance Brokers (CQIB) recently conducted a review of direct insurers Home and Contents PDS documents. With over 150 insurers issuing PDS documents it was not possible to review them all, nor forensically analyze the ones that were reviewed in great detail. However, what was found was a number of statements in policy wordings that should be of concern to the buying public.
Before providing a few examples, it needs to be said that the direct insurers operate with the price-point being their key to achieving sales success. But do they consider that the quality of the cover may be compromised to keep the price down? We all want to save money and pay as little as possible, however the real cost emerges when the cheap premium cover fails to make good your loss. That’s the principle of ‘you get what you pay for’ in action.
Of course there is always better quality cover available but direct insurers call-centre staff, all company employees with sales targets, are well versed in presenting the premium savings to be made with their product and rarely, if ever, offer cover options or any advice relevant to your needs. An explanation of any shortcomings of their cover product, at claim time, is something else you’re unlikely to hear. Here are a few examples that rang the warning bells:
Accidental damage cover offered by direct insurer: Accidental damage accounts for approximately 8% of all home losses and 47% of all contents losses. It is an important cover, yet many direct insurers do not automatically offer this cover. You must request to extend the policy and then an additional premium is charged.
When you request the extension don’t be fooled as some insurers place insufficient low limits on the amount they will pay in the event of an accidental loss.
Fusion cover offered by direct insurer: Fusion losses account for about 11% of Home and Contents losses and yet, again, some direct insurers do not automatically include it in the policy. You have to request and pay extra for the cover. We found polices with sublimits (the maximum the insurer will pay) as low as $1,000, a sum that is not adequate to cover the cost of today’s household appliances.
Away from home cover offered by direct insurer: With the holiday season approaching, it is important to have your contents covered while you have items away from your home in a holiday residence. Several polices reviewed have no cover at all for this situation whilst others, once again, require you to request and pay extra premium for an extension of cover.
Business equipment and tools of trade cover offered by direct insurer: Many quality policies automatically include cover sublimits of $5,000 to $10,000 however the lower priced polices have little or no cover unless (you guessed it) an extension is requested and a higher premium paid.
Building compliance cover offered by direct insurer: Building Compliance – Home cover excludes any additional costs resulting from the building/s not being compliant with the most recent building codes, laws or regulations. This is a big issue for older homes, as all would all be affected. These extra costs of reinstatement are automatically covered under most comprehensive, quality cover policies.
Let the buyer beware and remember, your CQIB Broker has the knowledge and experience to advise, select and provide quality comprehensive policies, taking into account your needs, the policy wording, the insurer’s performance including claims settlement history, and price. Be vigilant out there when buying insurance.