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Householders' Insurance
Saturday, April 1, 2006
Consumer rights

The debate over the National Credit Bill has brought into focus the confusing issues concerning home insurance, and the fact clients sometimes overpay for cover, or even pay for products they don’t need.

Rhys Dyer, Insurance Director at MortgageSA, says, “The National Credit Bill has brought to the fore the likely changes to the sourcing of compulsory homeowners’ insurance – which covers the bricks and mortar of the property. Although there is no law making home owner’s insurance compulsory, most banks make it so in order to secure their loan.
“But when the new National Credit Bill is enacted – within the next few months - homeowners will be quite within their rights to refuse the bank’s imposed insurance and to obtain cheaper cover elsewhere, possibly saving up to 30%.”
Mr Dyer notes that life assurance associated with home loans is another area of confusion. Certain bank home loan products include life assurance automatically, often a condition of granting the loan. While banks can insist a client take out life cover in order to obtain a bond, the client actually has free choice as to the product, intermediary and assurer.
Buyers should therefore be aware of their rights to free choice when it comes to taking out a home loan,” he points out. “Even if you have an existing bank policy, you should be encouraged to discuss it with your broker to ensure it is the most appropriate for you. Pure life cover products have changed significantly over the past few years, and you may find that there is now a more appropriate option on offer.
He agrees that it is a good idea to prepare for the possibility of being unable to pay off a home loan due to death or incapacity, but urges buyers to consider all their long term assurance options including, for example, a Mortgage Protection Policy. This type is tied to the specific loan. No medical is required; while it can provide additional protection such as cover for your bond instalments should you be retrenched.
Another issue hat is often overlooked concerns occupation of a house prior to transfer. “A buyer should realise that the seller is still liable (as legal owner) for any damage to the bricks and mortar of that property although not for the household contents of the new purchaser.
“It’s only when transfer goes through that the risk of loss or damage to the building passes on to the new owner.”
As regards your household contents and motor vehicles, Mr Dyer stresses the importance of advising your short term insurer that you are moving, to ensure that you are fully covered in your new home.
“Insurers will have to review the premium under your policy to reflect the new area in which you live, the security arrangements in your new home (burglar alarms, bars, fences etc) and whether your car will be parked in a lock up garage or out on the road.
“If your household contents and motor policy are not amended to reflect your new circumstances, there is a real likelihood that claims will be declined.”
Finally, remember that the insurance cover provided by the removal company for transport of your household effects is expensive and not obligatory. Intead, such cover is oftn included in your existing household contents insurance policy at no additional cost; you simply have to notify the insurer of the impending move.
For further information please contact Rhys Dyer at MortgageSA on (021) 481 7300. www.mortgagesa.com.
 

Copyright © Insurance Times and Investments® Vol:19.2 1st April, 2006
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