77. Special conditions for property insurance

Insurance providers may impose special conditions on a property insurance policy based on various factors. These conditions are additional requirements or restrictions that the insured must comply with to maintain coverage. For example, the insurer may require the installation of specific security measures (e.g., alarm systems, deadbolts) or regular maintenance of certain property features (e.g., roof inspections). Failure to adhere to these conditions could result in a breach of the insurance contract and potential loss of coverage. 

Abnormal rise in premiums 

An abnormal rise in premiums refers to a significant and unexpected increase in the cost of an insurance policy's premium payments. In the context of property insurance, it means that the amount the policyholder (in this case, the property owner) is required to pay for insurance coverage has experienced a substantial and often unanticipated jump from previous premium rates. 

Several factors can contribute to an abnormal rise in insurance premiums: 

• Claims history: If a property owner has filed multiple claims under their insurance policy, especially for significant damages, the insurance company might raise the premiums to compensate for the increased risk of future claims. 
• Changes in property condition: Any alterations or changes made to the property that increase its risk profile can lead to higher premiums. For instance, adding a swimming pool or making structural modifications might trigger a premium increase. 
• Local factors: If the property is located in an area prone to certain risks such as flooding, earthquakes, or other natural disasters, the insurance company might adjust premiums to reflect the higher potential for claims. 
• Market conditions: Economic conditions, changes in insurance regulations, and market trends can also influence premium rates. If the overall market experiences shifts, it might result in higher premiums. 
• Policyholder's credit score: In some cases, insurance companies consider the policyholder's credit score as a factor in determining premiums. A lower credit score could lead to higher premiums. 
• Insurer's profitability: If an insurance company experiences financial challenges or reduced profitability, they might raise premiums across the board to offset their losses. 

High excess 

A high excess, often referred to as a high deductible in the UK, pertains to the sum of money that a policyholder—usually the property owner—is obliged to pay before their insurance coverage becomes effective and begins addressing the costs of a claim. This financial contribution from the policyholder serves as a threshold, after which the insurance company steps in to cover the remaining portion of the claim, as specified within the terms of the insurance policy. 

Operational overview 

• Policy terms: When a property owner acquires an insurance policy, they concur to a predetermined excess amount, which forms part of the policy's stipulations. 
• Claim occurrence: Should the property endure damage or encounter a covered loss, such as incidents involving fire, theft, or other insured events, the property owner should initiate a claim procedure with their insurance provider. 
• Excess payment: Before the insurance provider commences reimbursement for the claim, the property owner must settle the stipulated excess sum from their own financial resources. This payment reflects the policyholder's responsibility for a portion of the claim's expenses. 
• Insurance coverage activation: Following the property owner's payment of the excess, the insurance coverage activates, and the insurance company then proceeds to cover the remaining expenses of the claim, up to the predefined limits of the policy. 

Unusual conditions 

"Unusual conditions" in the context of property insurance refer to atypical or uncommon terms, provisions, or requirements that are included in an insurance policy. These conditions may deviate from the standard or typical terms found in most insurance policies. Unusual conditions could involve specific clauses, restrictions, limitations, or requirements that policyholders need to adhere to for the policy to remain in effect or for claims to be valid. 

In property insurance, unusual conditions might include: 

• Special coverage exclusions: Some insurance policies might have exclusions that are not commonly found in other policies. These exclusions could relate to specific types of damage or certain causes of loss that are considered unique. 
• Maintenance requirements: An insurance policy might include unusual conditions related to property maintenance. For example, the policy might require the property owner to perform regular inspections or take specific preventive measures to reduce the risk of certain types of damage. 
• Risk mitigation measures: Unusual conditions could involve requiring the property owner to implement specific risk-reduction measures. This might include installing certain security systems, fire prevention equipment, or other safety features. 
• Policy renewal requirements: Some policies might have unusual conditions that need to be fulfilled for policy renewal. This could involve submitting additional documentation or conducting specific assessments. 
• Geographical restrictions: Unusual conditions might include restrictions on coverage based on the property's location. Certain risks associated with the property's geographical area might lead to unique conditions being imposed. 
• Special valuation methods: Unusual conditions could involve using special or non-standard methods for valuing the property in the event of a claim. 
• Unique claims process: Some policies might have unusual conditions related to the process of filing and handling claims. This could involve specific documentation requirements or steps that need to be followed. 

Insurance refusal 

Refusal refers to the denial or rejection of an application for insurance coverage by an insurance company. It occurs when an insurance company declines to provide the requested insurance policy to the applicant, often due to certain perceived risks associated with the property, the applicant, or other factors. 

Reasons for refusal 

• High risk: If the property is located in an area prone to natural disasters, has a history of frequent claims, or has specific features that increase the risk of damage, an insurance company might refuse coverage due to the elevated potential for future claims. 
• Uninsurable features: Certain features of the property, such as outdated electrical wiring, structural deficiencies, or other safety hazards, might lead to refusal as they increase the likelihood of claims. 
• Property condition: If the property is in poor condition or requires significant repairs, insurance companies might be reluctant to provide coverage until the property is brought up to acceptable standards. 
• Applicant profile: The applicant's history, credit score, claims history, or insurance coverage record can also influence the decision to refuse coverage. 
• Previous claims: If the property owner or applicant has a history of filing frequent or high-value claims, insurance companies might refuse coverage due to the perceived likelihood of future claims. 
• Non-compliance: If the applicant does not meet specific requirements set by the insurance company, such as submitting necessary documentation or fulfilling certain safety standards, the company might refuse coverage. 
• Market conditions: In some cases, insurance companies might temporarily halt or reduce the issuance of new policies due to changes in market conditions, regulations, or financial considerations.