When it comes to insurance, disclosure is probably the most important thing; especially when it’s time to obtain an insurance policy or file a claim. I’ll encourage you to keep reading the true story below; it just may prevent you from having a claim denied.
A husband and wife bought a home as their primary residence and acquired a good insurance policy to keep them protected. Later, they decided to relocate and planned to use the home as a rental for future retirement income. After renting it out for a couple of years, the last tenants vandalized the property and caused major damage estimated between $40-60,000 dollars. The owners filed two claims on their property, provided all the needed documents, answered all questions asked by the insurance company representatives and tried to help the insurance company as best they could to settle the claim. After some time though, the insured finally received a formal insurance claim denial from their insurance company. The insured were confused; they paid their premiums, maintained their home, reported the claims timely and attempted to stop further property damage. So why were they being denied?
After a careful read of the denial, it became evident that although they had a good policy which afforded excellent coverage, the information provided on their application to obtain insurance wasn’t correct. And by that I mean, the application never disclosed if the property would be used as a rental. In other words, an omission on the application allowed for a strong defense when it came to a denied insurance claim. I’m not saying the insured intentionally left this information out, but unfortunately, the lack of correct information when filing an application to obtain insurance or even updating the change in risk when they did start renting, caused the owners a large financial setback—and an insurance claim nightmare. I don’t believe what happened was intentional, but even small errors have compounding ramifications; somewhere a mistake was made which left the property owner vulnerable and exposed to financial loss.
We all trust people are going to do what they say acting accordingly – and trust is the foundation of insurance. We trust insurance companies to treat us fairly when we need them, and they, in turn, expect us to be honest in our dealings with them; and I do believe that most people in the insurance world want to be honest. People purchase insurance with a desire never wanting to use it, hoping it covers everything needed in the event they do, but never really understanding what they purchased and how to use it. An insurance policy is only as good as your understanding of it. If you don’t know what type of insurance you’ve purchased, what insurance coverages are available and what your responsibilities are as demanded by the policy, you’re already going up the insurance creek the wrong way.
Claims are tough enough – sometimes we step over dollars to pick up pennies, and then trip and fall when bending over to pick those pennies up. Think of all the damage the real property owners mentioned above suffered; their house was destroyed, had no coverage for repairs and had to come out of pocket to fix it up; not only did they pay out of pocket, they lost all the money paid out as insurance premiums for coverage they couldn’t use!
So to end on a good note – always remember: “An ounce of prevention is worth a pound of cure.”
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