Insurance Claims - Some Basic Principles...
Introduction - insurance is purchased to provided us with cover against a financial loss should an unforeseen occurrence happen to cause damage or destructions to our possessions. Of course, we all hope this will never to us but each year insurers are faced with large payouts following Accidents, Fires & Floods. Claims totally many thousand of pound are now reasonably common. How will your claim be handled and the procedures to follow are laid down in your policy document and details of how to make a claim are presented to you when you accept policy cover. It is a good idea to tell your insurers as soon as possible and they will want to discuss matters with you at the earliest opportunity. Before confirming that a claim is valid under your policy document, your insurers will need to check that cover is actually in force for the loss that has occurred. The insurers will want to know when and how the loss happened, for claims involving
Theft or a Loss; they will want the incident reported to the police and an appropriate reference number obtained
Policy Wording - every loss is the effect of some cause, and this is the starting point to discover if your claim will be valid. Most modern policies cover a wide range of eventualities and your loss may be the result of a single cause or a chain of events. However a loss occurs, it is essential that the cause falls within the scope of your policy wording. The basic principle which governs this is caused Proximate Cause. Proximate cause is the active efficient cause that sets in motion a chain of event that brings about a result without the intervention of any force started and working actively from a new and independent source. Well that statement may be a little difficult to grasp, so consider this scenario.
If you have a building insurance policy which covers Fire but excludes Water Damage and a Fire occurs at the property. The Fire Brigade turn up and the bulk of the damage to your property is caused by the Fireman saturating your property with water then the insurers will pay the claim as the proximate cause will be deemed to be Fire. Establishing proximate cause can be a complicated task but insurers are very fair when deciding if a peril is insured or not.
Paying Your Claim - when deciding to pay your claim, your insurers will want to know if you have any other policies in force under which you may possibly be able to submit a similar claim. Where it can be established that more than one insurer is involved in a loss, then a principle known as contribution comes in to play. Under the contribution clause, your insurer can call on another insurer to pay part of the claim but necessarily an equal amount. An example would be a claim for loss or damage caused to your possessions whilst on Holiday, it is fairly common for a Holiday Insurer to enquire if you have an All Risks section under your Home insurance policy. If you have, your Holiday Insurer may wish to ask them for a contribution.
Subrogation - the insurance principle of Subrogation, prevents an insured person from “making a profit” from a claim. Subrogation can be defined as the right of one person (in this case your insurer) to stand in place of another and to avail themselves of your rights and remedies. Therefore, if your insurance company has paid your claim, they will then have the right to recover their loss from any party that they can prove is responsible for the occurrence.
Insuring your property for the correct value is of paramount importance and you should spend time in making sure that your sums insured are up to date an accurate. Under most Property insurance policies, the insurers will have a clause Known as Average. This condition has the effect of reducing any claim that you may make under your policy in direct proportion to the amount of under insurance. It is thus vitally important to make sure your sums insured are accurate
