Page 19 - Personal Underwriting Mandates & Guidelines - Binder - Version 3

BUILDINGS AND HOUSEHOLD CONTENTS
There are many similar factors which must be considered when underwriting and pricing both the Buildings and Household contents sections. This section deals with the underwriting rules and guidelines that Buildings and Household contents have in common.
UNDERWRITING CONSIDERATIONS ‘New for old’/replacement value
Cover is based on a "new for old" principle. What does "new for old" mean?
Most household contents policies offer "new for old" cover as a standard. It also applies to most All Risks cover. "New for old" means the insurer will either replace items that are totally destroyed, or cease to function due to damage, with new equivalent versions (or pay for the full repair costs if items can be returned to their original state). In other words, the insured receives, or is compensated sufficiently to afford to buy, the exact same new version; or, if the item is no longer available, then the latest equivalent.
Note: The intention of "new for old" is not to enrich the client but simply to replace the exact same or equivalent item that the client had prior to the loss.
Buildings and Household contents
Example
Value
If your three-year-old television set is stolen, we may buy you a new one or pay the price of a new one. If your photo album or digital camera is lost, however, we pay only for the album or camera, and not the sentimental value of the photos they contain. If your television set is damaged by lightning and we cannot repair it we will buy you a new one or pay out. The damaged item (salvage) then becomes our property and you may not dispose of it unless we agree to it.
Salvage
Any insured property that we decide is uneconomical to repair or any lost or stolen property which is recovered is referred to as salvage and becomes our property after the settlement of your claim.
Replacement value for Buildings is based on the entire replacement cost of rebuilding the home. This includes outbuildings, boundary walls, public supply and mains connections, inspection fees, demolition fees, site clearing, professional and architect fees.
Replacement value for contents is based on the cost of replacing the entire Household contents of the home. This includes items kept in garages, outbuildings, cottages as well as garden furniture. The pay-out is based on the value of similar new property on condition that the sum insured is sufficient. The policyholder must review the level of cover on a regular basis to avoid underinsurance.
18 Personal Underwriting Mandates & Guidelines – Binder – Version 3