The importance of being earnest: Submitting an accurate statement of facts
By James Woods
Picture this. Overnight, a part of your building catches fire, causing structural damage to the property. You then contact your insurer to start the claims process only to realise that your insurer is not willing to pay for your claim. And that could be the case because in your statement of facts, the information you declared to your insurer was not accurate, including the declaration of the risks associated with your building. As a policyholder, it is a requirement of the Insurance Act to disclose all material facts to the insurers. Failure to do so can result in your policy be declared null and void.
Accurate Statement of Facts
Here are some of the key information pieces to share with your insurer:
Construction Details
Insurers require accurate construction details including:
- Materials used in the walls
- Roof construction (whether they are pitched or flat)
- Floor construction (timber/concrete)
- Any non-standard materials used[1]
Declared value
It is critical to declare the accurate rebuilding cost of your property often termed as Building Declared Value (BDV). The declared value is the cost of rebuilding the premises insured on the first day (day one) of each period of insurance. This must include the cost of reinstatement, debris removal, professional fees, and the cost of regulatory compliance. If this figure is adequate at the first day of the policy period, any claim against the buildings section will be free from the Condition of Average, which is also known as ‘underinsurance.’ We have covered the topic of underinsurance in a previous blog.
We need to be aware that policy schedules often show two values. One referred to as the declared value or BDV and one as the sum insured (often shown as Building Sum Insured) or BSI that takes into consideration variable changes such as inflation, change in regulations and change in cost of building materials. Buildings Declared Value (BDV) and Buildings Sum Insured (BSI) are often confused, and it is important to make sure you have the correct level of cover for your property.
Type of tenants or occupancy
When you are insuring your property or block of flats it is important to also state the type of tenants or occupancy in your property, that is, whether they include professional tenants, family members, students or retired occupants, or the trade or business being undertaken if a commercial property. Information about property being used as a second home or left unoccupied if not declared, can cause an insurer to decline the claim or part pay claims costs.
Claims history
If you have made any claim with any other insurer in the last five years with regards to your property then these will need be declared in the statement of facts to make sure that the risk and premium is underwritten correctly. Again, this could impact any claim that you may make in the future if not declared.
In addition to the above, any flood or subsidence history at the property also needs to be declared.
Failure to declare or share accurate information with your current insurer can lead to two scenarios: It could result in you paying a higher premium, or in a worst-case scenario, the insurer could consider cancelling your policy ab initio (as if it had never been taken out).
Need correct advice in case of a change in your situation? Reach out to our team of experts and specialists and we would be happy to advise and help you. Drop in a note here – and we will be glad to assist and offer our help. More information about our services and offerings can be found here.
James is an Account Executive at Albanwise Insurance Services.
[1] To be noted: Standard materials include brick, stone, slate and tile
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