What are household policies?
Household policies are package policies where insurers bring a range of covers into one single document. For example, they could cover damage by fire, storm, riot and liability for injury to others.
Other examples of package policies include travel package policies and commercial package policies.
What are the two basis’ on which a household insurance claim can be settled?
Indemnity basis - This means the amount paid out by the insurer, represents the cost of replacing the item with another of the same age and in the same condition. This basis of cover is unusual under a household insurance policy.
New for old basis - This mean the full cost of replacing the item as new is paid (usually to the supplier that provides the replacement. Although ‘new for old’ is now the standard basis of cover, insurers still usually apply a wear and tear deduction to some claims such as damage to clothing or household linen.
What does buildings insurance relate to?
Buildings insurance related to the structure of the home, including fixtures and fittings, sheds, garages, greenhouses, other outbuildings, pools.
It also includes paths and patios.
In other words, anything that would be left behind when moving to a new house.
The sum assured on the buildings section of a household policy should represent the rebuilding cost at the time the rebuilding is complete.
What perils will typically be excluded on a building’s insurance policy if a building is unfurnished or unoccupied for more than 30 or 60 days?
- Riot, civil or political commotions, malicious damage or vandalism
- Escape of water or oil
- Theft or attempted theft
- Accidental breakage of glass and sanitary features
Which of the following perils are always subject to an excess?
- Storm or flood
- Escape of water
- Subsidence, ground heave or landslip
Subsidence, ground heave or landslip cover excludes loss or damage caused by:
- normal shrinkage or settlement;
- faulty workmanship, design or materials;
- demolition, structural alteration or repairs;
- coastal or riverbank erosion;
- movement of solid floor slabs, unless the foundations are damaged at the same time; and
- some structures other than the main property unless it is damaged at the same time.
Note that a substantial excess of, say £1,000 or more, is always imposed for subsidence cover.
Subsidence damage to a swimming pool in the garden of the insured property is…
only covered if the insured building is damaged.
Damage to the insured building caused by a passing lorry while the insured is away on holiday is …
covered.
Damage to a TV aerial is…
excluded from cover. Damage to a building caused by the breakage or collapse of a TV aerial is usually covered.
The following are also in the scope of buildings insurance cover:
- accidental damage to drains, pipes, cables or underground pipes
- legal fees, architects’ and surveyors’ fees, cost of debris removal (incurred because of a building being reinstated)
- loss of rent payable (to the freeholder) or receivable (from a tenant) while a building is uninhabitable: and the cost of alternative accommodation, up to to defined limits.
Contents insurance relates to…
households goods and personal effects belonging to the insured, or a family member living in the property.
Jan has moved in with her friend Gill for a few days as her house is being decorated. While she is staying at Gill’s her laptop is stolen from Gill’s spare room. How will Jan’s insurer treat the claim?
Her claim would be paid out.
The contents section of a home insurance policy automatically extends to provide cover while the contents are temporarily removed from the insured’s home, but remaining within the defined territorial limits.
Are motor vehicles covered under the contents section of a home insurance policy?
Motor vehicles are specifically excluded under the contents section of a home insurance policy, as are:
- other property more specifically insured under another policy;
- securities and documents;
- medals and coins, unless
specifically insured; and - livestock (other than horses).
All household insurance policies now include legal liability cover. How does it work for buildings and contents cover?
Buildings cover relates to liability incurred by the insured or their family as ‘owner’ of the property and liability incurred under the terms of the Defective Premises Act 1972 for faults in any property formerly owned and occupied by the insured.
Contents cover relates to liability incurred by the insured or their family as:
- occupier rather than owner of the property;
- a private individual for personal liability; and
- as an employer of domestic employees.
What does the legal liability cover for household insurance look like?
Cover is in respect of legal liability for accidental injury (including death or disease) and accidental damage to material property for the insured and family members permanently living with them. An indemnity limit applies to any one claim, typically up to £2m (increased to £10m for employers’ legal responsibilities).
Working from home can also introduce additional risk under the liability section of the policy, e.g. business visitors to the premises.
Consequently, many companies now have a separate section covering any working from home business risks.
What are the optional extensions of a basic household insurance policy?
- Personal possessions - Cover will be on an ‘all risks’ basis for personal possessions which are regularly taken outside of the home, including possible overseas visits.
- Money and credit cards - Cover against accidental loss of money and credit cards and fraudulent use of cards
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What are the general exclusions of a household insurance policy?
They are -
- war and similar risks, radioactive contamination, sonic bangs and pollution; and
- matching items (excludes the cost of replacing or altering undamaged items forming part of a set, suite or other article of a uniform nature, colour or design, including carpets and other floor coverings when a replacement for the damaged item or part cannot be matched).
What are the policy features on standard cover in travel insurance policies?
- Personal accident benefits
- Medical and associated expenses
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What optional extensions could you see with a travel insurance policy?
Failure of tour organiser - Cover of up to £1,500 is paid following the financial failure of the tour organisers to whom advanced monies have been paid.
Lack of services or amenities - Cover where there is a substantial withdrawal of services at the insured’s hotel due to industrial action lasting for at least 48 hours. Benefit is approximately £20 per day, up to a maximum of £200.
Loss of passport - Covers additional travelling/accommodation costs incurred in obtaining a replacement passport, following loss or theft. The sum insured is usually £100 - £250.
Legal expenses - Provides cover for legal expenses incurred in pursuing claims for compensation, arising out of death or injury to the insured. Sums insured vary between £3,000 and £50,000.
John died whilst on a round the world cruise with his wife Mary. His death was caused by him falling downstairs while under the influence of alcohol.
Will Mary’s claim for his death under the personal accident section of their travel policy be paid out?
No, death caused by alcohol is excluded under a package travel policy, as it is for all other insurance policies.
What are the general exclusions from cover under a travel insurance policy?
- death, bodily injury or sickness caused by non-prescription drugs or intoxicants;
- pregnancy or childbirth;
- physical or mental incapacity;
- hazardous activities;
- suicide or self-inflicted injuries;
- loss of luggage caused by confiscation, loss of stamps, documents or camping gear, loss of money unless reported to the police within 24 hours;
- damage to fragile objects; and
- terrorism.
What are the three types of liability cover typically included in a commercial package policy?
- Employers’ liability
- Public liability
- Product liability
All three covers are subject to a limit of indemnity.
What are the optional extensions to a commercial package insurance policy?
- Refrigerated stock - Spoilage of freezer contents due to a breakdown of the appliance or the failure of the public electricity supply. Deliberate action by the supply authority is excluded.
- Business ‘all risks’ - Also known as extended theft, this covers accidental loss or damage and is bought as extra protection for fixtures, fittings, trade equipment and, possibly, stock. Such cover excludes pilferage and shoplifting and is subject to an excess.
- Legal expenses - This covers the trader’s legal costs in defending an action brought by a customer, employee or neighbour, as well as the costs of an action initiated by the trader faced with loss or possible loss as the result of someone else’s action.
