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Note: The attached picture is only a representation of a house that is Class A. Therefore, it is insurable.canyon ranchYou asked your Insurance agent for a house insurance coverage. Your Insurance agent asked for the boundaries of your house. Here’s how to describe your property’s boundaries:

Imagine standing in front of your house, facing the street.

Front – Street (the standard answer); otherwise, describe if it’s not a street/road.

Right, Left or Rear/Back- Same for all. Is it 1. An Open Space or a vacant lot? 2. House of the same make? 3. Others (Describe)

After seeing the description of your property’s boundaries, your Insurance Provider declines to cover or insure your house.

Here are some of the reasons I gathered through the years of my being a Non-Life Insurance Agent:

Reasons why Insurance Companies decline to insure your house:

1. Make (or Build) – The material of your house is “Class B” meaning, it is made of timber or wood. In the Philippines, esp. back in the 70s or earlier, most houses esp in the suburban areas are made up of half concrete (ground floor) and timber or wood (second floor). Coupled with this material, the house is too old. Something like more than 30 years old or even older.

Reason for this is that if fire spreads in this type of “make”, it spreads fast and it is not easy to put out the fire. And since the foundation is not that strong, houses gutted by fire can easily collapse. So this is considered rated or risky for any Insurance company.

2. Location – If it can be proven that the location of your house is flood-prone (by way of historical facts), why will the insurance provider cover it in the first place? Insurance companies are not mean but logical. People have got to understand that Insurance companies exist mainly to protect their clients’ interests but the simple explanation is this: Why will you offer to cover a property when you know that the area is flood-prone? No company will survive or last if it will not impose certain limitations or restrictions. Underneath this rationale is a business decision. Same principle applies on item no. 1 if the “make” or build of the property does not consists of strong material.

I had a client whose house was located in a well-cemented road. The street itself or the width of the road can accommodate three (3) cars passing through it, which to me, is relatively wide in a suburban setting in a typical Philippine street. But here’s the catch. The construction type of the house is Class B. That is already a given setback. However, that is forgivable or should I say, negotiable – meaning you can appeal. Not all Class B house are declined automatically. The Underwriting Dept. of the Insurance company considers all other factors. Ultimately, the house was rejected and thus, cannot be insured or covered. I gathered that the rationale for the rejection was this: the area is congested. So the whole area, meaning the vicinity is already blocked off or considered rejects from the insurance company’s list. Yes, some Insurance companies have a a list of areas or locations that are considered rejects or not insurable. While the street where the house is located is wide and cemented, the roads leading to it are congested and heavily populated. In other words, in case of fire, the firetrucks will have difficulty entering even the roads leading to the house so fire will just spread with uncontrollably because firetrucks will have a hard time getting into the affected street and thus, won’t be able to put out the fire at the earliest time possible.

3. No Caretaker.  Let’s say that the house is well-built or is considered Class-A type, meaning construction of the house is full concrete; even if the house is located in a gated or guarded subdivision but if the house is unoccupied for more than a month, then most Insurance companies will not cover it simply because if fire breaks out, there is no one to call the authorities’ attention or help to eliminate the fire. It is simply considered risky on the part of the Insurance company because arson can also be a possible cause of fire. However, if you can prove that a caretaker goes there or even stays there once a month, then you can appeal to the Insurance company.

4. Misrepresentation. You wanted a coverage for your house using a residential rate which is lower than a commercial rate but you are using your house discreetly for commercial purposes. Sometimes, the Insurance provider will not bother to check the interior of the house so the insured can get away with it by having the house insured at a lower premium. However, if you file for claims for loss or damages due to accident or acts of nature, the Insurance company’s inspector will investigate first. If it was proven that the house was used for commercial purposes, then the company will not pay for the claims because of misrepresentation. I had a client before whose house was covered by a comprehensive insurance package. But a few years later, this client used it for commercial purposes by selling frozen, ready-to-eat foods. When the client renewed her comprehensive home insurance, I had to tell the insurance provider the truth. So the company adjusted the premium to commercial rate but the client eventually decided not to continue with the home insurance coverage because the premium was 4x the original rate.

While the above are based on my experience with a previous insurance co., it is still advisable to check with your Insurance company on their restrictions as the case may vary per company.

One good thing, none of my clients have yet to claim for any loss or damage whether by fire or any acts of God or man-made incidents like falling aircraft, riots, etc. And I’m grateful to God that I have zero claims experience with my clients when it comes to home insurance. Who wants to be hit by accidents or calamities anyway? If you are spared, then that to me is a grace from God.

So if you think that your house will pass the scrutiny of the insurance provider, get a comprehensive home insurance and protect it against such perils as fire, typhoon, flood, earthquake, burglary, etc. You just have to check the benefits of their plan to see what exactly are you getting from the insurance company. Some even offer free replacement of door knobs or locks at the insurance company’s expense. Things like these go unnoticed if you don’t have a reliable insurance agent. You just have to go through the fine print. Sadly, some people (a few of my clients) only remember to insure their property after their houses got burned. What are the chances of it repeating again? It really depends. You can never tell. But it’s different with floods. There are houses that don’t get flooded before but now they get flooded also. I don’t know. Is it because of climate change? So don’t wait for your house to get hit by a calamity or accident like fire.

Get a comprehensive insurance for your house now while you can. For a few thousand pesos (depends on the coverage amount/sum insured), it’s worth the investment and will give you a peace of mind. 

Ronnie Reyes is a Financial Advisor. Talk to him for your Insurance and Investments requirements. Check out his profile at https://ph.linkedin.com/in/iamronniereyes.

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