A man whose attempt to cook steak in a toaster sparked a fire that destroyed his house was upset to find that his insurance policy did not pay out as much as he had wanted it to.
The case was dealt with by the Insurance and Financial Services Ombudsman (IFSO) complaints scheme, which does not identify the person who complains or the insurance company involved.
The man decided to prepare a meal of steak and chips, but opted to cook the steak in a toaster rather than the frying pan.
While it was toasting, he left the house to go to the local fish and chip shop for chips.
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The fire severely damaged the home he shared with is partner.
Their insurance company paid $418,000 for the damage, the maximum that could be paid under the couples policy.
But the couple felt it was not sufficient to replace the house and contacted IFSO, saying the insurer should pay another $200,000.
They said it had not been made clear to them that their policy had changed from replacement cover to total sum insured.
The scheme did not uphold their complaint, saying the insurer had paid the maximum entitlement and the pair had been adequately informed of the change to their policy.
The couple said they were $200,000 short of what they needed.
Karen Stevens, Insurance and Financial Services Ombudsman, said not understanding the annual insurance renewal process or the cost to rebuild their home, added further avoidable suffering to the stress of the fire.
Every year, everyone with insurance policies receives a renewal offer that can amend or change the policy that they originally signed.
I cant stress highly enough the need to read each renewal letter carefully. Most insurers now offer total sum insurance, meaning your house is insured for a set price. If you dont do your homework and insure your house for too low a sum insured, you could find yourself unable to rebuild your home. The sum insured should be what it would cost to rebuild, not what its worth on the market.
Your acceptance of the new terms is often the next payment of your premium.
Insurance and financial services ombudsman Karen Stevens says online calculators can be a guide to how much cover you need.
She said people who were unsure of how much cover they would need to rebuild their homes could use online calculators as a guide.
Online calculators arent a substitute for an insurance valuation provided by a registered valuer or home valuation provided by a building expert. We recommend you get the experts in if youre unsure.
Insurance Council chief executive Tim Grafton said almost all policies changed from total replacement to sum insured after the Canterbury earthquakes. But there had since been a move for many policies to offer full replacement cover for fire.
[The Insurance Council] did some research a few years back and approximately half of people did not understand that sum insured should be the cost to rebuild your house not the market value, what you bought it for, what you think its worth, not the valuation.
Our advice on sum insured is to use the calculators, and to try a few of them. Things like hard to access areas, retaining walls, being on steep hillsides, can all add to the costs. If in any doubt, your house is often your biggest asset so spend the money on an expert working out the rebuild costs if you have unusual features.
Stevens said, in this case, the original fire event itself was preventable.
Cooking steak in a toaster is literally a recipe for disaster. To have then left the house and toaster unattended for the sake of hot chips must be a constant source of regret. Never, never leave cooking unattended, even if you think youll just be a minute and please, use your appliances for the purpose for which they designed. Toasters are for toast.