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How ‘Auto-Renewing’ your policy can be dangerous!

We have all been there before, life gets in the way of looking at your insurance renewal on the car, house and sometimes business insurance. We know it happens but have you actually stopped and thought about how damaging it could be to you or your business?

Most people don’t really know what they are insured for, this is down to the really confusing small print and the use of aggregator sites to get the ‘cheapest deal’. Don’t us wrong we all love a good deal but getting it wrong in the first place could leave you under insured or worse not insured at all. The worst part is you wouldn’t know until the worst possible time….Claim time!

For example ‘Bob Smith’ let his home insurance renew automatically assuming that the amount of cover he had on the buildings was enough as he did it 3 years ago and had great deal, what Bob didn’t realize that the cost of rebuilding his home had increased and now didn’t have enough cover to repair the house after a flood that ruined his home. When he claimed the insurer applied the ‘Average’ Clause and he found himself massively out of pocket, let me illustrate this:

Bob had insured his home for £300,000 and the true value was £500,000 so he was under insured by 40% the flood had caused damage of £60,000 so the insurer applied the ‘Average’ clause to the claim and only paid him out £36,000 leaving Bob to foot the remainder of the £24,000 bill out of his own pocket. This can be applied in most claims if the Insurer deems it acceptable.

In Motor insurance auto renewing can be just as damaging if you do not disclose changes at the time of renewal, a bit of a grey area this one as the law states that an insurer can not let a policy lapse if they have not heard from the insured and rely heavily on the renewal invite being sent out to the policy holder to absolve themselves.

An example of how this can bite you in the bum, Sally Mali changed her job not long prior to renewal, she should have told her insurer about this change right away, but again life gets in the way, she had her renewal and just threw it in the draw and said ‘I will call them next week’ but didn’t, it turns out that her new job was not an acceptable occupation to her current insurer who would not have offered a renewal if they had known about it at the time, Sally was the cause of an accident involving 3 cars on the motorway.

After filling in the accident forms and telling them about changing jobs the insurer then asks when she changed jobs and gave her the most appalling news that she was in fact not insured as it was hewr duty to disclose any change in material facts to them prior to renewal and been as she hadn’t she was not insured. Now the insurer would have had to pay for the damage to the other vehicles and any personal injury as they were the relevant insurer (another story for another time) but now will chase Sally Mali for all the money paid out to the 3rd parties and also will not fix her car, so sally is now looking at a bill of £85,000 for two wrecked car and 6 counts of personal injury all because she didn’t check her renewal with her insurance company.

These are just two examples of how important it is to check your insurance every year and not just let it go, as you can see it could be a costly mistake. Now that’s not to say the Insurers are totally blameless in this, they should be making every attempt to contact you to make sure things are all good, but they don’t so please make sure you do this simple thing!