Evacuation insurance a lottery
You’ve paid your premiums and there are no prizes for holding back and taking the famous ‘we’ll cope’ attitude.
As the residents of Wakefield vacated their homes last week, doors were flung open all over Nelson-Tasman to house fire refugees.
Under a Civil Defence evacuation order they arrived on doorsteps with kids, cats, clothes, chickens and family treasures. Many had the neighbours in tow.
Grandparents’ spare rooms were chocka. Friends housed friends.
No-one has gone unfed or without a bed thanks to small-town economics. That’s where the community gives and money is not discussed.
It’s now time for an insurance discussion, Nelson, and the rest of you can listen up, since it could happen to anyone and the fire risk isn’t over yet.
The vast majority of us have insurance policies. Even if we don’t own the house we live in, we tend to have a contents policy. Inside this valuable little document is a hidden gem – the temporary accommodation clause.
In Wakefield, 2500 people have returned home and the fires didn’t touch a single house. Yet some insurers will still cover temporary accommodation costs resulting from the evacuation.
Beware, though – it is a lottery, with the likes of IAG saying no and Vero saying yes.
For those insured with Vero (AMP) or AA Insurance, the clause is very clear. They will pay for a motel or apartment if you are prevented from accessing your otherwise safe and sanitary home by order or direction of government or local authorities. A Civil Defence evacuation would comply with this.
IAG, which is behind State, AMI and NZI, says you must suffer ‘‘physical loss or physical damage’’. While there is no fire damage, use of the term ‘‘physical loss’’ could easily have a common sense reading of physically losing access. Going a step further, you are actually suffering prohibited use, not just a simple loss-of-use.
For those who did incur motel costs in the Nelson fire and are insured with an IAG brand, I’d encourage you to put forward this argument and get a formal ruling. It can always be tested via the ombudsman at no cost.
I would also encourage IAG to tidy up their wording and be specific about evacuations and prohibited use.
What’s covered?
As an example, AA insurance pay costs up to $20,000. You’ll need to pay the excess on your policy, which will mean covering the first few hundred dollars yourself.
For those with cashflow difficulties, insurers will often pay the accommodation provider directly. You won’t get approval for a five-star retreat in the Abel Tasman, but a short-term holiday let or apartment will qualify. If it’s not suitable for an extended stay, move.
While Nelson-Tasman has demonstrated an incredible level of Kiwi hospitality, do remember that relationships with family and friends are easily strained.
Insurers are there to help. You’ve paid your premiums and there are no prizes for holding back and taking the famous ‘‘we’ll cope’’ attitude. Just think of it as boosting the economy. Moteliers will be delighted to be the beneficiary of insurance payouts. Some in the local region offered up rooms for free, but there is no reason to let them go unpaid if you are covered under a policy.
In Nelson the fires are expected to burn for weeks and repeat evacuations are possible. It’s worth phoning your insurer to check your temporary accommodation entitlement. Be prepared if it happens again.
Landscape lottery
Landscape damage is another area of insurance homeowners need to look into. Blackened scars will be left around homes in the Tasman valleys of Pigeon, Teapot, Eves and Redwood.
All policies are not created equal. As an example of two very different outcomes, an AMP policy (Vero) will only have $1000 cover for landscaping damage. Compare that to NZI (IAG) where all gardens and lawns within the boundary, up to a value of $100,000 are covered. They will pay to remove plants, clear debris, fertilise, re-bark and replant lawns. They’ll also replace damaged lighting and irrigation.
When it comes to insurance, we all make decisions on policy quality versus price. City dwellers don’t need the same level of landscape cover as those on bigger sections. Take a look at your own home carefully and weigh up the risks you’re exposed to.
Janine Starks is a financial commentator with expertise in banking, personal finance and funds management. Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.