Let the policyholder beware!
By Jeremy Clayton
So you have something to insure, you have that piece of paper or electronic document that says you are insured and you have paid over your hard-earned cash. Everything is cool and you can relax because, if anything goes wrong, you are insured. Yes? Not necessarily, is the unfortunate answer.
Over very many years I have seen claims payments reduced or claims repudiated, so it is vital that you know what you are buying, when you have bought it and you check that it is correct.
Insurance policies are legally binding contracts and so if there is a warranty, special condition or exclusion, then you need to be aware of it. There may well be excesses (the amount you pay as a contribution towards the loss) that you were not aware of and, in the local market, they can be as much as 20% of the value of your property – not just 20% of the loss! So, imagine your car is worth $25,000, and it is stolen or written off, you will not receive the first $5,000 of the claim. It could be an expensive experience.
You may have certain exclusions, typically on Travel policies, pre-existing conditions may be excluded, and the policy will not cover certain activities, some as ‘mild’ as canoeing! Many policies have ‘warranties’ for example, a business insurance policy may state that you must not have more than a certain amount of oil/fuel stored at any given time or that you must have security guards, if you breach either, Insurers have the right to reject your claim.
There are two other extremely important points to remember and not adhering to either can have serious consequences.
Firstly, the insurance industry is based on a principal of ‘uberrima fides’ translated to ‘utmost good faith’. In essence it requires all material facts to be disclosed at all times relating to an insurance contract. In simple terms, when applying for insurance – tell Insurers everything, warts and all! So if you have a medical condition, have a history of claims, your property is built of straw not brick or in addition to running an accounting practise you are also manufacturing fireworks… you must disclose all these facts. If you don’t, then you are asking for trouble. Of course you’ll get away with it the entire time you don’t have a claim but when you do, you’ll get found out!
Secondly, and one of the issues that catches so many policyholders out, is the question of ‘average’ or ‘underinsurance’. Simply, if your asset is worth $10,000 and you only insure it for $5,000, then you are 50% underinsured and any claim payment will be reduced by that percentage. Simple, but upsetting when you come to make that claim.
So, what to do about it?
The answer is long winded, but as a start, have a look at the guide on the JWS web site and this will give you some ideas.
Although it concentrates on Household insurance, the principal applies to all types of asset insurance. Remember, setting your sum insured is your responsibility, so don’t blame your Insurer or Broker.
If you wish to know more about any of these points, please contact us by emailing: [email protected] or calling: +254 (0)709 455 026.