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Notwithstanding our involvement in the real estate industry over the last 38 years, we are still learning from our mistakes and omissions, as well as from the various tricks that various insurance firms and others come up with.
Here are some real-life examples so that you can start considering your own situation and avoid surprises.
· Due to rain, water came into an apartment and the wooden parquet was damaged requiring replacement. The building and its contents were correctly insured (over insured we say), but notwithstanding the €1,000 damage, the insurance firm deducted the excess amount (correctly) but also deducted another 30% due to depreciation. It claimed that the damaged parquet was 5 years old and the company could not replace something old for new. So, in this case, the unfortunate insured was expecting to receive €1,000 replacement cost (less €300 excess) but ended up with €500 i.e. half. So, he is not really insured.
· If a building/house say 20 years old is damaged/demolished due to an earthquake or burnt down by fire, the insured will receive only a portion of the replacement cost (in this example 50%!!). Thus, they are not insured.
· Our claim that the replacement cost includes labour and materials and as such any depreciation should be deducted from the materials and not the labour, we did not succeed (go to court we were told!!).
· The roof drains were blocked by leaves and as a result, the room underneath was flooded. It was claimed by the insurance that it is the duty of the insured to make sure that the drains are not blocked. What does this mean in this case (leaves etc) that we should inspect daily the roof even at night (??).
· If you manage to succeed in arguing that it is unreasonable for the insurance company to expect a daily inspection, the insurance will claim that overflowing is due to bad construction detail of the drains!!
· The safety valve of the water tank got stuck and in addition to the water loss, it has affected one of the rooms. This sort of circumstance happens, and it is due to the valve/dirt that the water pipes collect. “No, we are not paying since you are responsible to check the valves”. We say yes, but shall we inspect the valve every 2-4 hours and even at night? So, if one inspects the valve and it is okay, but after 10 hours it gets stuck so?
· A water pipe underneath a private road broke as a result of which the soil subsided. Out of the 2 km road, the affected area was only 10 sqm the insurance firm claimed that “we will not replace the road asphalt with new since the road is 15 years old (but in very good condition). So, what are we to do? When considering the excess and the nonsense of the insurance you will be happy to get half of the cost. Therefore, you are not properly insured.
· A sewage treatment plant had damaged equipment. The insurance agreed in the case and the extent of the damage, but again refused to replace the equipment due to the new for old. Agreed, but then can we find used equipment for the purpose? It is up to you we were told!! What are we going to do, go around the shops to buy older equipment ourselves and not the insurance?
· On another occasion, notwithstanding that the building has third-party insurance, an accident happened, the insurance has yet to reply despite 3 letters of reminder and including statements of witnesses.
You do appreciate that insurance companies are very happy to collect the insurance amount, but when it comes to paying up, it is another matter altogether.
The above and other events in the insurance world makes us believe that we are not insured at the end. This is of particular importance to developers, owners, administrative committees and so on.
We do understand that the new for old (for equipment), but each one of us has one goal in mind to replace/repair the damage.
Out of the four insurance firms that we cooperate with, only one came up to say that their policy cover is replacement and no new for old is included in their policies.
Others informed us that they have a clause to cover the depreciation amount with a “small” increase in the premium.
Surely people get a shock when this happens. For this reason, we wrote a letter to the Registrar of Insurance Companies to inform her of these goings-on.
