Consumers caught out by insurance policies' 'fishhooks'

Do you have to be wearing your rings for them to be covered by your insurance policy? Better check...
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Do you have to be wearing your rings for them to be covered by your insurance policy? Better check...

Picture this: You're on holiday, on an overnight train in India. Your bag is stolen from its spot beside you.

In it are a couple of your favourite pieces of jewellery. But when you go to your insurer to ask for help replacing them, you're turned down.

This happened to one New Zealand traveller, who was told by his insurance company that they would not honour his claim because the jewellery was not "worn or carried" by him at the time, as specified in the requirements of his policy.

His was one of thousands of complaints received by the Insurance and Financial Services Ombudsman relating to jewellery claims. Ombudsman Karen Stevens said it was common for people to be caught out by terms they did not understand in their policies.

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But there are some things you can do to improve your chances of getting a payout.

Be clear with your insurer about what you need cover for.

Stevens said one of the most common reasons for a claim being declined was that people had not specified the item of jewellery on their policies, and instead expected to be able to rely on their general contents cover.

"If you do not specify these items on your policy schedule, then the maximum sum in the policy for individual items will apply, irrespective of the value. This is because having an expensive piece of jewellery increases the risk to the insurer. If you did not tell the insurer that you had this item, it did not take the correct risk into account when setting your premium."

Adam Heath, executive general manager of portfolio and products at Vero, said his company's contents insurance policies included automatic cover for jewellery and watches up to a limit of $3000.

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 "If you have a lot of jewellery, even if each piece is worth less than that limit, the maximum we'll pay is $15,000 or up to 15 per cent of your total contents insurance, whichever is higher. If you have an individual piece worth more than $3000 or you have several pieces of jewellery that add up to more than $15,000 you need to tell us so you can add them to your policy."

Keep records of what you own, with receipts where possible. In one case heard by Stevens' office, a couple claimed for stolen jewellery - and said the receipts for it were stolen in the same theft. The insurer would not cover it because there was no proof of ownership.

Get a valuation

If you get regular valuations of your jewellery it will make the claims process smoother and avoid disputes.

Heath said it was a good idea to get a valuation annually and update policies accordingly.

Stevens said many people were not aware that their policies required this.  "A lot of people think once they have specified an item, that's all they need to do. Under some policies that might be enough but with others you might need to have an annual valuation or up-to-date valuation and if you don't have that, it might mean you don't qualify for the full amount [of the payout]."

Your insurance policy might offer replacement value, which is the cost to replace the stolen item with an equivalent item, without any deduction for depreciation or wear and tear.

Another option is "present-day value", which can also be called indemnity value or market value. This covers the cost to purchase an equivalent of similar age, quality and condition as your item was in at the time of loss. Check with your insurer so that you know which cover you have.

Look after it

It is common for claws to become loose and stones to fall out or clasps to be damaged. But you need to keep up with your jewellery maintenance. If you know there is something wrong with a piece of jewellery and you do not do anything about it, you might not be covered in the event of a claim.

Similarly, you can't leave your jewellery in public places and expect your insurer to cover it if it's stolen.

Stevens said insurers could rely on a requirement that people take "reasonable care" of their belongings to decline claims in cases such as when jewellery was left on a beach.

A couple complained to Stevens' office when they had jewellery stolen from their backpacks while they swam in Rarotonga. They argued the beach was secluded and the bags were hidden. However, her office found the insurer's exclusion applied on the facts: the items were left unattended and the beach was a public place. 

Storage

Stevens recommended checking whether there were any special requirements from the insurer regarding where jewellery was kept.

She remembered one complaint from a woman with a very expensive diamond ring. It was specified in her contents policy but only covered if she was wearing it or if it was stored in a safe. When it was stolen from her dressing table, while she was at home, the insurer would not cover it.

Take care who you invite in

If you invite people into your house - even if that's via an open home or because they are tradespeople doing work, usually your insurer will not cover you for anything they steal.

Stevens said there were a few fishhooks to watch out for when it came to insuring jewellery but the most important thing was that people understood the policies they were buying and that the cover was adequate.

 - Stuff

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