Top 10 reasons New Zealanders' insurance claims are declined
When disaster strikes, you count on your insurer being there to step in and bail you out. But what if they don't?
We asked the industry what the most common reasons are that claims were declined.
1) You didn't take enough care
Just because you have insurance, it does not mean you can be reckless with your stuff. Leave the house unlocked when you go on holiday for example, and you may find you aren't covered for a burglary. Most insurance policies exclude cover for theft from unlocked premises. Taking "reasonable care" is a standard obligation on every policy. Insurers have turned down claims because keys were left in an unlocked car or valuables were left on the beach while someone went swimming.
2) Your policy doesn't actually cover what you're claiming on
Insurance Brokers Association chief executive Gary Young says it is relatively common for people to not realise they should have specified particular items in their house and contents policies. "Sometimes you think everything is covered but there might be a sub-limit on jewellery or anything over a certain value. That's an area that can catch people out if they are not careful, if you have a valuable ring it needs to be specified."
3) Your car could be unsafe
Claims can be declined after an accident, because the car was found to be unsafe or un-roadworthy. Check your tyres have enough tread - if your car would not pass a warrant, your insurer could decline your claim.
4) You were drinking
If you are over the drink-drive limit, the insurer can turn down your claim for a car accident. When you lodge your claim, insurers ask whether you have consumed any alcohol in the hours before the crash.
If you say no, or very little, and they have cause to doubt you, they can investigate even if you were not breath-tested at the scene.
Karen Stevens, the Insurance and Financial Services Ombudsman said the new drink-drive limits had already caused problems: "In a recent case, the claimant was over the limit of 250mg of alcohol per litre of breath, but under the old limit of 400mg. He argued that, as he was under the legal limit at the date of policy renewal, he should have insurance for the damage to his car. But the legal limit applied at the time of the accident, not the policy renewal, and he had no cover."
In one case heard by Stevens' office, a customer was declined in his claim when it was found that he'd had half a pint of beer with a meal before the accident. He had told his insurer that he had nothing to drink.
5) You breached the conditions of your licence
If you're on a restricted licence and you are out driving after 10pm or with passengers in the car, you will very likely find your insurance will not cover you in a crash.
Last year, IFSO heard a complaint from someone whose claim was declined because their son was driving with his sister as a passenger while on a restricted licence. He was distracted by a noise from the gearbox and hit the side of the road, causing the car to flip.
The parents complained the insurer should have paid out because the presence of a passenger did not make a difference. That was declined. The IFSO case manager said if the driver had a suitably-qualified person in the vehicle with him, they would have been able to help stop the crash.
6) You have a named driver policy but someone other than the named driver had an accident.
Some insurance policies are cheaper, especially for young drivers or those with performance cars, if you opt to insure named drivers only. But this means that if anyone else drives the car, the insurance could be worthless.
7) Malicious damage was caused by the property owner or someone legally entitled to be on the premises
If your kids have a big party and your house gets trashed, you might not have a right to claim on your insurance policy because the offenders were invited into the property.
Scarily, this same condition can apply if you have something stolen from someone you invited into your house via an open home.
8) An unlicensed driver had an accident in the vehicle
No licence means no insurance cover. Don't let anyone without a licence drive your car. In one case Stevens' office heard, a woman had insured her car and had her partner listed as the main driver because she was yet to get a driver's licence. Her partner suffered a cut to his thumb and she drove him to the doctor. On the way, she had an accident. She completed a claim form and indicated she did not hold a driver's licence.
The claim was declined because the policy required the driver of the insured vehicle to hold a current driver's licence. In this case her complaint was upheld because the IFSO case manager said it was more likely than not that it was likely that not holding a driver's licence did not contribute to the accident.
9) A private-use policy vehicle was used for commercial use
If your car is insured for personal use and you then decide to start operating as a pizza delivery person or Uber driver, you will need to let your insurer know. Insurers said this was a relatively common reason that insurance claims were declined.
10) You didn't tell your insurer something important
You must tell the insurance company about anything that will be material to the risk you wish to insure. This requirement exists not only when the insurance is taken out but also at each renewal of the policy and even during the policy term.
The Insurance Council said this would include things such as convictions, whether you have ever been declined a policy, driving infringements and vehicle modifications. For a house policy it would include whether the house as going to be unoccupied, any building work going on if the house was being used for business purposes.
If you fail to disclose material information, the insurer may, depending on the date the information should have been provided, either refuse to pay part or all of a claim or void the policy.
Stevens said: "Unfortunately, some of the most common insurance complaints the IFSO Scheme deals with could have been avoided. Our number one recommendation to consumers is to read your policy and make sure you understand the cover provided.
"If you don't understand, ask questions. Take note of the policy exclusions and limitations - house insurance policies won't provide cover for gradual damage and vehicle insurance policies won't provide cover for breach of licence. It's important to keep receipts, photos, or records of household items, and valuations for personal items such as jewellery, because you will always need to be able to prove your loss for contents insurance claims. No proof can mean no payment. Non-disclosure continues to be an ongoing issue for consumers and a frequent reason claims are not met. It is essential consumers tell insurers absolutely everything when arranging any insurance and at annual renewal".
Tim Grafton, chief executive of the Insurance Council, said insurers accepted the vast majority of claims."Very, very few claims are declined. We do urge people to be familiar with their policies as it is a contract and if they have any doubt or questions they should have this clarified with their insurer."