Thankfully, it shouldn’t be news that needs to be broken too often.
If you are faced with the task, I have some guidance… I would guess that at some point you have heard someone say that insurers never pay out – that ‘insurance companies always deny claims’.
But it simply isn’t fact. According to the Insurance Council of Australia, around 96 per cent of claims are accepted.
At EBM RentCover, we settled about 5,600 claims in 2023 and paid out more than $49.3 million.
‘That’s all well and good’, I hear you say, ‘But what do I tell my landlord who just had their claim denied?’.
I know that statistics aren’t much of help in such circumstances – the landlord feels like the world is against them and they’re looking for someone to blame.
An indisputable fact is, that while most claims are paid, it is inevitable that some will not be.
The best piece of advice I can offer, is to understand the main reasons why claims get denied – and then try to avoid them.
When it comes to insurance claims, the rule is simple – if there is a valid claim, it will be paid.
The key here is the ‘valid claim’ bit. Chances are, if your landlord’s claim has been denied, it was because the claim was not valid.
While there are sometimes complexities around a claim refusal, in the main, claims get denied for one of a few reasons.
Reason one – it isn’t covered
Landlord insurance is designed to protect policyholders from a range of common risks that they may face.
It does not cover everything.
If insurance was to cover every possible eventuality that a policyholder could face, the risk for the insurer would be colossal – making cover either impossible or priced so high as to be out of the reach for most.
In many cases where a claim is denied, it is because the loss trying to be claimed is not covered under the terms and conditions of the policy.
When it comes to landlord insurance, there are several things that are genuinely not covered and unable to be claimed, but people try, which is why it is the main reason why a claim gets denied.
These include:
- Wear and tear.
- Routine maintenance and repairs.
- Broken down appliances – there may be cover if an electrical motor fuses (as this may be an insured event), but not if an appliance simply stops working.
- Loss of rent due to market conditions – sometimes market factors may mean that the landlord does not receive any rent or receives less rent than they had previously (e.g. if the rental is vacant, or the rent has been lowered), but these are not ‘loss of rent’ scenarios covered by landlord insurance.
- Renovations or improvements to the property (this includes when you claim for tenant damage and want to restore the property with additions or enhancements).
So how do you avoid a claim being denied?
Before advising your landlord that they should submit a claim – or starting the claim process on their behalf – check that the reason for claiming is covered.
Refer to the product disclosure statement (PDS) and, if you are not sure, get in touch with the insurance provider (via your EBM RentCover Relationship Manager).
Reason two – policy invalid
Another consideration when it comes to claiming, is that claims are only valid if they are made for insured events that occurred during the time that the policy was in effect – from the date and time noted on the cover summary or certificate of insurance.
This means that a claim cannot be made for something that happened before the policy was in place or after it had expired and was not renewed.
For example, if the tenant was in arrears before the policy was taken out, a claim for those arrears cannot be made because the event happened outside of the policy start and end dates.
The same principle applies to damage claims where the damage occurred before the policy came into effect or occurred after the policy had expired.
The best way to avoid a claim being denied for this reason is to make sure that there is a valid policy in place before submitting the claim.
It is also important to check when the policy became effective and that the insured event occurred while the policy was in force.
TIP: If you are arranging cover on behalf of your landlord, it is vital you submit the paperwork in a timely fashion (especially when it comes to renewals) – or you could find yourself making a claim of your own, on your professional indemnity cover if your landlord suffers a loss because of your inactions.
Reason three – obligations not met
Another common reason for a claim being denied is because the policyholder did not meet their obligations.
When it comes to an insurance policy, both the insurer and the policyholder (or a representative acting on their behalf, like a property manager) have obligations to fulfill.
And if the policyholder fails to meet those obligations, their claim can be void or the payout reduced.
Always check the PDS to see what the landlord’s obligations are but, in general, they are obliged to:
Tell the insurer about any circumstances that increase risk at the property.
The policyholder also needs to make full disclosures, so always make sure they review and approve the details submitted when applying for or renewing a policy.
Keep the premises adequately maintained.
If a lack of upkeep contributes to a loss, then the claim could be impacted.
It can also be impacted if the policyholder fails to act (within reason) to prevent further loss or does not meet their responsibilities under law.
To reduce the risk of claims being denied for these reasons, be sure that your landlord knows their requirements under insurance and applicable legislation – and fulfill your contractual obligations in these respects.
Be honest. Insurance fraud includes the exaggeration of otherwise legitimate claims, and intentional misrepresentation of the facts.
If you suspect your landlord is being dishonest, be aware of your obligations so you are not complicit.
Reason four – not enough evidence
Another reason a claim may be denied is because it was submitted without any supporting evidence.
Claims need to be proven, so some evidence of a financial loss – and what led to it – needs to be provided.
If there is no evidence of what has occurred, we cannot substantiate the loss, and the claim may be declined.
So, to reduce the risk of a claim being rejected, be sure to include all the documents/evidence to support the claim at the time of submission.
It is better to check that a claim is valid before you submit it, than to have to explain why it was denied afterwards.
If you do happen to put in a claim that is rejected, the insurer will explain the reason for the denial.
You can then relay the reason for the refusal to your landlord or, if it is felt that the claim was valid, you can challenge the decision.
As ever, if you have any questions, reach out to your EBM RentCover Relationship Manager.
Not partnered with EBM RentCover? Get in touch today.
