I do know about under-insurance. In the case I’m suggesting, the total was appropriately insured for the house with granny flat.
I guess my question is whether the insurance company decides only 50% of your house has been destroyed, so they pay out only 50% ($500k) of the sum insured. And then, the question is if you get only half of the sum insured, can you knock down the old part and build something smaller that is approved to current standard?
I don’t mean as a scam - I mean as a way of stretching what you get and making do if you have no other resources.
I guess it depends on whether they get their own providers to do the work ie they contract the repairs themselves and pay the contractors themselves or if they issue you a payout of the amount. If you received a payout I guess you could demolish and rebuild a new house less the things you no longer required but the Insurance policy would then need to be amended or cancelled and a new policy created to reflect those changes.
If they however pay contractors then they would be bound to carry out the work they have been authorised to do and nothing else beyond the scope they have been given ie if the granny flat was included in the scope of works it would be rebuilt, unless you could negotiate a different outcome with the insurer to substitute what is made good…that negotiated outcome might not be possible depending on your policy contract.
All of this is not legal advice, it is purely my thoughts and should be checked by a qualified legal adviser to ensure you get the correct advice.
Thanks, all of you. I can see the insurance companies are going to be severely tested when the current floods have subsided enough to enable repairs. I’ll keep reading and researching!
Indeed, from personal experience of Contents Insurance I can say the following:
If the Insurance company arrange the replacement it is like for like as near as possible taking into account whether the damaged, lost or stolen goods have direct replacements. If they don’t it is usually replaced with an item that is of comparable specifications or slightly exceeds them.
If receiving a payout, consumers get absolute choice of what and when or even if they replace goods. This includes brand, cost, colour, size, and all other choices a consumer can make.
This is why I surmise that a house repair would have similar treatment.
I have never had to seek Insurance for damage to a house I have owned luckily. When we had contents claim we had been renting at those times prior to moving to our own home.
When your claim for loss or damage to the building is covered and a member of our supplier network is unable to complete the repair or rebuild, we will ask you to engage a builder to provide a scope of works and provide a quote on the cost to repair or rebuild the building on a ‘new for old’ basis.
Once the scope of works and quote is provided to us, we will arrange for it to be assessed. This will involve reviewing the quote to determine it is appropriate and reasonable for the scope of works. This includes a consideration of the appropriateness of materials, repair method, labour and material costs and overall cost effectiveness.
If the quote is appropriate and reasonable for the scope of works, we will then pay you the assessed amount. If it is not, the quote may be adjusted. This may include adjusting the scope of works or the quote. We will then pay you the adjusted amount of the quote.
The policy states clearly the insured might not be able to get the works done for that amount since AAMI gets discounts the homeowner might not be able to match. It is well worth reading every insurance policy more than once, and again every year to remind oneself of what is actually insured and how it could play out if a serious claim arose.
