Despite my involvement in real estate over the last 42 years, I am still learning from mistakes and omissions and various tricks that insurance companies and others come up with.
I want to refer to a few real examples so you can identify with your own situation and not face surprises in the future.
- Due to rain, water came into an apartment, and the wooden parquet floor was damaged, requiring replacement. The building and its contents were correctly insured (over-insured, I would say). Still, notwithstanding the €1,000 damage, the insurance company deducted the excess amount (correctly) and deducted another 30% due to depreciation. It claimed the damaged parquet was five years old, and the company could not replace something old for new. So, in this case, the unfortunate insured expecting to receive €1,000 replacement cost (less €300 excess) ended up with €500, i.e., half. So, they were not insured.
- So, if a building or house of say 20 years old is damaged or demolished due to an earthquake or destroyed by fire, the insured will receive only a portion of the replacement cost (in this case, 50%). Thus, it is not insurance.
- Our claim that the replacement cost includes labour and materials and any depreciation should be deducted from the materials and not the labour did not succeed, we were told to “go to court”.
- Leaves blocked the roof drains, and as a result, the room underneath was flooded. It was claimed by the insurance company that it is the duty of the insured to make sure the drains are not blocked. Does this mean that we should inspect daily the leaves on the roof, even at night?
- Suppose you argue that it is unreasonable for the insurance company to expect a daily inspection. In that case, the insurer will claim that overflowing is due to the poor construction of the drains.
- The safety valve of the water tank got stuck, and in addition to the water loss, it affected one of the rooms. This happens often, and it is due to the valve/dirt the water pipes collect. They will say: “No, we are not paying since you are responsible for checking the valves”. We say yes, but shall we inspect the valve every 2-4 hours? So, if someone inspects the valve and it is okay, but after 10 hours, it gets stuck, what happens then?
- A water pipe underneath a private road broke as a result of which the soil subsided. On the 2 km road, the affected area was only 10 metres, but the insurance company claimed, “we will not replace the road asphalt with new tarmac since the road is 15 years old (but in very good condition). When considering the excess and the nonsense of the insurance firm, you will be lucky to get half of the cost. Thus, you are not properly insured.
- A sewage treatment plant had damaged equipment. The insurance company agreed and acknowledged the extent of the damage but again refused to replace the equipment due to the new-for-old theory. Agreed, but then can we find used equipment for the purpose? It is up to you, we were told. So, are we expected to go around the shops to buy older equipment ourselves?
- On another occasion, the building had third party insurance, and an accident happened. The insurance company is yet to reply to several letters of reminder and witness statements.
Insurance companies are very happy to collect the insurance premium, but it is another matter altogether when it comes to paying up.
The above and other events in the insurance world makes us believe that we are not fully insured.
This is of particular importance to developers, owners, administrative committees and so on.
I understand the concept of the new-for-old (in the case of equipment), but every one of us has one goal in mind, to replace the damage.
Of the four insurance companies that we cooperate with, only one said their policy cover is “replacement” and not ‘new for old’ in their policies. Others informed us that they have a clause to cover the depreciation with a “small” increase in the premium.
People get a shock when this sort of thing happens.
For this reason, I wrote to the Superintendent of Insurance Companies to inform her of these practices. No response.