Are you under insured?

At the recent stint at the caravan show I happened to bump into a customer with a particular dilemma.

 They had had their caravan stolen some 18 months previous and were at the show looking for a potential replacement. I asked if they were ready to purchase when I heard something that rather concerned me.

 They were in a dispute with their insurance company regarding the sum insured. I asked why this was and was informed that they had taken out new for old insurance a number of years ago.

Okay, so what was the problem?

It turns out that the customer had not informed the insurance company of the cost of the equivalent caravan each year.

The customer assumed that as the policy was being auto renewed that the figure of the cost of a new replacement product was increasing at the same time.

It wasn’t until their caravan was stolen and they needed to claim that they found out that because they had not informed the insurance company each year at the time of renewal what the cost of the equivalent caravan was, that the sun insured would revert to market value which in this case was around £10000.

So the customer was in the position of having paid a new for old premium for a number of years and assuming that they were fully covered for the cost of a new caravan, this was not the case and would have to find around £9000 to fund the difference. 

 I checked with a contact at the show who provides insurance and he said that this was an industry standard procedure, I was quite shocked at this being the case.

The customer had gone to the insurance ombudsman and the case had been going on for a year and was likely to settle in their favour but was not a sure thing.

This case has highlighted the need of customers with new for old insurance to make sure they let their insurance company know at the time of renewal what the figure for the new caravan is.

I am in contact with the customer and will  let you know the outcome, be sure to subscribe to this blog to find out what happens.