Insurance insights

Why claims get declined

It’s true that few claims are declined, but inevitable that some will be. And when they are, it’s usually down to one of five main reasons. Read on to find out what these are…

Did you know that around 5,300 claims were submitted to EBM RentCover in 2023? And of these, we paid out approximately $47.5 million. You read that right – $47.5 million! We believe this figure disproves some people’s belief that ‘insurers always deny claims’ or ‘try to avoid paying out’. It’s just not the case. When it comes to insurance claims, the rule is pretty simple – if you have a valid claim, it will be paid. The key here is the ‘valid claim’ bit.

So what makes a claim invalid? Why would an insurer decline a claim? Find out below…

It simply isn’t covered

What’s the top reason a claim isn’t paid? Well, it’s usually because a policyholder is claiming for something that actually isn’t covered under the terms and conditions of their policy.

When you take out a landlord insurance policy, these are the things that are genuinely not covered, and therefore unable to be claimed on:

• Wear and tear – damage that occurs over time.
• Routine maintenance and repairs – costs of routine maintenance and repairs (e.g. a plumber replacing a washer in a tap).
• Broken down appliances – there may be cover if an electrical motor fuses, but not if an appliance (e.g. a microwave) simply stops working.
• Loss of rent due to market conditions – sometimes market factors may mean that you don’t receive any rent or receive less rent than you had previously, for example if the rental is vacant or if you’ve lowered the weekly rent. From an insurance perspective, these are not reasons for a loss of rent claim.

If you analyse the above list, these are simply the costs of owning a property and, again, aren’t covered by insurance.

So, how do you avoid making a claim for something that isn’t covered? Well, before taking out cover, you should read the product disclosure statement (PDS). This sets out exactly what is and isn’t covered and will help you to ensure you are insured for the events that you are most at risk of experiencing and will help you to understand what you are not covered for. TIP: Anything that’s not specifically mentioned in the PDS as being covered, isn’t.

The policy isn’t valid

Typically, an unpaid (generally the insurer won’t assess the claim until payment is received), lapsed, or cancelled policy is considered invalid. If the premium hasn’t been paid or if the policy has been cancelled, then it stands to reason that there is no cover. There also isn’t cover for events that occurred outside of the dates and times noted on the cover summary or certificate of insurance. This means that you can’t make a claim for something that happened before the policy was in place or after it had expired and was not renewed. For example, if your tenant was in arrears before you took out the policy, you cannot claim for those rent arrears. 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 wrong policy is in place

There are different types of insurance policies to cover different letting situations. For example, if you rent a property short-term on Airbnb you will need a different policy than one that is designed for a home that is rented out long-term to tenants. If you are renting out an apartment, you will need a different type of policy than one that is designed for a free-standing home. As the risks posed by the various scenarios are different, the risks covered by the insurance policy also differ. It is important that landlords purchase the right landlord insurance policy that covers both the specific type of property (house, unit) and the way it’s being rented, to avoid having the wrong cover in place and a claim denied.

The policyholder doesn’t meet their obligations

When it comes to an insurance policy, the policyholder has obligations to fulfill. If the policyholder fails to meet those obligations, their claim can be void or the payout reduced. You can check the PDS to determine exactly what your obligations are, however, in a nutshell, you are obliged to:

• Tell the insurer about any circumstances that increase risk at the property, such as the property being vacant for an extended period or renovations taking place.
• Keep the premises adequately maintained. If a lack of upkeep contributes to a loss (e.g. you fail to fix broken roof tiles and the ceiling collapses because rain gets in), then the claim may be impacted.
• Be honest. Insurance fraud is no joke and covers a range of issues, including the exaggeration of claims or the intentional misrepresentation of the facts.

If an insurer proves that you failed to tell them something that would have impacted them offering cover, failed to maintain the property, or attempted insurance fraud, they may be within their right to reject an insurance claim and cancel the policy.

No supporting evidence

Finally, claims need to be proven. This means, you need to provide some evidence of a financial loss – and what led to it. For example, if you’re putting in a damage claim, you’ll need to provide photos/videos of the damage. If there is no evidence of what’s occurred, the Claims Specialist cannot substantiate the loss and is within their rights to decline a claim. Put simply, to make a claim you need to be able to show the insurer what has occurred.

At EBM RentCover we provide the guidance and support you need to make a successful insurance claim. We have a dedicated team of claims specialists who look at every claim individually and work hard to ensure you get the payout you’re entitled to as per your policy. If you need help making a claim, please get in touch with a member of our Expert Care team – 1800 661 662.

*While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you need us we are there, contact 1800 661 662 if you have any questions.