What your insurer doesn’t know can hurt you

We have heard the saying “what you don’t know won’t hurt you.”  Anyone who has had experience with the legal system knows that the saying is a myth.  In the insurance industry, the saying could be changed to:  “What your insurer doesn’t know can hurt you.”

It is a common misunderstanding, when applying for insurance, that you only have to answer the insurer’s questions.  If they didn’t ask you about speeding tickets, you can keep quiet and not worry about it.  Wrong.  By failing to disclose material facts, you have made a misrepresentation to the insurer.  When they find out about it (believe, me, they will if you make a claim), they will cancel your insurance coverage.  Good luck finding affordable coverage now.

It’s one thing to make a misrepresentation on an application. Most people will be able to avoid such problems unless they are deliberately dishonest.  But are you aware of misrepresentations on renewals or changes in your situation?

You see, when you apply for a home insurance policy, you go through a big questionnaire about your house.  You should ask for and keep a copy of that application.  Any change in the facts on the application may represent a change in risk for the insurer.  When you applied for insurance, you may have had an unfinished basement.  However, when you finished the basement (and added a wood stove to help heat it), you have changed the risk for the insurer.

They’re not going to ask you every year if there have been any changes.  It is your obligation to inform them.

So, if you have gas heat but you have added baseboard heaters to help heat some cool rooms, you should advise your broker (in writing, e.g. e-mail) of the change.  It may change your premium, but that’s better than no coverage. 

I would also recommend that you review your policy every year that it comes in.  Make sure that everything is correct.  For example, I noted when I got my policy that my insurer had noted that we had a certain system in place, when, in fact, we did not.  I called to have them make the correction.  It was a clerical error on the broker’s part, but it had to be fixed. 

Finally, on the topic of insurance:  as you battle with the recyclable material from the packaging on the Christmas presents, I suggest that you take the time to update (or do one, if you don’t have one) your home inventory.  At the least, take a video camera (borrow or rent one if you don’t have one) around the house and through every closet.  Ideally, use a computer program (a lot of the home finance programs have a module) and itemize everything in your house.  Store the tape or computer file at a friend or relative’s house, so if your house burns you can prove to the insurer what you had.