Prior to Hurricane season is the right time to think about buildings and contents insurance again.
Both types of insurance are important as severe weather is likely to affect both your home and your contents.
In contrast to other countries such as the US buildings insurance in Cayman covers both wind and flood damage. However, it is important to verify that the insurance covers the total property or contents value.
The biggest issue that comes up in claims in underinsurance, says Lauren Leupen, claims manager with Island Heritage.
She recommends that before Hurricane season is the time for home owners to ensure that they have adequate coverage on their buildings by having a valuation done every year or two. In the Caribbean, insurance policies penalise underinsurance and effectively reduce the amount that is paid out in the event of a claim.
In practice, the adjustor would compare the insurance value to the actual value of the building and apply the ratio to the claim.
This means that the owner of a building that is worth $200,000 but only ensured for $100,000 would only receive half of the actual claim.
“That works proportionally,” says Leupen,” so even if your damage is only $10,000 you will only get paid 50 per cent of your claim.”
The same applies to contents insurance and means that not having adequate insurance, for example to save money on the premium, really is false economy.
Buildings insurance in Cayman comes at approximately 1.8 to 2.2 per cent of the property value. The cost of home contents insurance is approximately 2 per cent of the insured value. Adjusting one’s insurance to the correct property values does not mean that a completely new insurance has to be taken out, says Leupen.
“The policy will just be endorsed and increased to what your buildings or contents limit should be at to adequately reflect what you actually own.”
“A good practice when you take out your contents insurance is to list everything, because then you know the value that you should have and you also have a good piece of documentation that you can give to the adjustor,” she says.
“It is also a good idea to take photographs and have them stored somewhere safe, for example online.”
In addition to insurance limits the size of the deductible is another important issue when considering appropriate Hurricane insurance.
“It is also just actually enquiring to what your deductible is when it comes to a hurricane,” she says.
While it is always written on the policy schedule some people have not read or do not properly understand it.
Hurricane deductibles work differently from deductibles that apply in the event of fire damage or for other types of insurance.
Hurricane deductibles are a set percentage of 3, 5 or 10 per cent depending on the value of the property.
Some insurers group building and contents insurance together and apply the deductible to the total amount.
Any claim will only apply to damage exceeding the deductible amount.