Property peril insurance is a cornerstone of financial security, protecting your property from unforeseen disasters. So much so, that Strata properties must have insurance, and if you purchased with a mortgage, it is likely that your mortgage provider will also require you to take out insurance to protect your property. This insurance is a two-way street. While the insurer promises financial backing, you, the policyholder, have certain obligations.  Breaching these obligations, through negligence or unawareness, can lead to denied claims, leaving you financially exposed.

This article explores key considerations to ensure that you do not inadvertently breach your property peril insurance policy.

  1. 1. Know Your Policy Inside Out:

This might seem obvious, but many overlook the importance of thoroughly reading your policy. Do not just skim the document. Understand the “perils” covered, such as fire, theft, flood, and other natural disasters. You should also pay close attention to exclusions, that outline situations where coverage will not apply. Common exclusions include wear and tear, deliberate damage by the policyholder, or losses exceeding the policy limits. You should also familiarise yourself with the terms dealing with deductibles under the policy. 

  1. 2. Honesty is Key:

Honesty during the application process is paramount. You must declare the correct value of your property, and this may need to be supported by a valuation report.  Disclose any pre-existing damage, material facts about the property’s condition, or past insurance claims. Withholding such information can be considered “non-disclosure”, which could be grounds for denying a claim, and could have you be considered as a “moral hazard” which could increase your future risk rating. 

  1. 3. Maintaining Your Property:

Your policy likely has clauses requiring you to maintain the property in a “good state of repair.”  This translates to taking reasonable steps to prevent foreseeable damage. Examples of this include ensuring proper roof maintenance to avoid leaks, keeping electrical wiring up-to-date, or clearing gutters to prevent water damage.

  1. 4. Vacancy and Unoccupancy:

Many policies have specific conditions regarding vacancy (completely empty) and unoccupancy (no one residing there).  Leaving your property vacant for an extended period could trigger exclusions for certain perils like vandalism or burst pipes. Understanding these provisions is crucial.

  1. 5. Renovations and Alterations:

Planning renovations?  Inform your insurer beforehand. Extensive works might require adjustments to your policy coverage, or temporary suspension.  Proceeding without notifying the insurer could leave you uncovered during the construction period.

  1. 6. Tenant Responsibilities:

If you rent out your property, ensure that your tenants understand their responsibilities regarding security, and basic maintenance.  It should also be a term of your lease that the tenant should not do anything that would breach your insurance policy.

  1. 7. Mitigating Losses:

Once damage occurs, you should take reasonable steps to minimise further losses. This includes, for example, boarding up broken windows to prevent water damage, or turning off the water main to your property in case of a burst pipe.  Not doing so might be seen as contributing to the damage by the insurer.

  1. 8. Security Measures:

Most policies expect you to implement security measures to minimise damage, and deter break-ins or theft. Failing to meet these expectations, could be used by the insurer, as grounds to deny a claim. 

  1. 9. Making a Claim:

Review your policy’s claims procedure carefully.  It will outline timelines for notifying the insurer, documentation required, and potential inspections. You should be sure to follow these procedures meticulously, in order to avoid delays or denials. It is advisable to take photos of the property regularly, as this provides evidence of its condition as at certain dates. After any damage, this will be useful and can be submitted as evidence for your claim.

  1. 10. Seeking Professional Help:

If you face a complex situation, or have concerns about potential breaches, do not hesitate to seek legal advice. A lawyer specialising in insurance law can guide you through the intricacies of your policy, and ensure that you navigate the claims process effectively.

It is important to remember that property peril insurance is a valuable tool, but it is also a contract. Understanding your obligations, and acting responsibly, will help to ensure that your policy remains in good standing, and protects you financially when disaster strikes.