Often times, say our legal interns, what appears to be simple may turn out to be complicated in the long run. The best way to un-complicate things is by understanding what you are getting yourself into from the word go.
Here are the most important things you need to know or do.
Short-term (non-life) insurance
Short-term (non-life) insurance exists to indemnify or compensate you for loss or damage you have suffered as a result of any of the events covered in your insurance contract. An insurance contract is a document containing the agreement between an insurance company and an insured. The contract will specify the risks that are covered as well as the terms and conditions of the cover.
So it follows that by reading the policy document you receive from the insurer, you, as the insured, should be able to ascertain the terms and conditions of the policy, the limits of the policy, if any, and what the insurer has excluded from cover.
The Contract and Underwriting
When concluding an insurance contract, it doesn’t matter who initiated the contact. The establishment of the contact sets in motion what is referred to as the “underwriting” of the policy.
“Underwriting” refers to the process where the insurer obtains information from the potential policyholder in order to assess the risk and to determine if it will accept the insured on cover.
It is also the process whereby the insurer needs to disclose to the policyholder certain terms and conditions of the policy.
One thing that we wish to emphasise is that during the underwriting stage, as a potential policyholder, you must provide the insurer with true and complete information and you should also ask questions during your interaction with the insurer’s agent. This is because the insurer relies on the information you give to determine if it will provide you with cover and, if so, on what terms. To keep costs down, it will only verify this information when you claim.
Policy Schedule
After the underwriting stage is concluded, the insurer must send you the policy schedule and wording.
The policy schedule should reflect a summary of the underwriting conversation you had with the insurer’s agent, if this was done telephonically. The policy wording contains the detailed terms and conditions of the cover. If the information contained in the policy documents is incorrect or you are unsure about a clause contained in the terms and conditions, you should contact the insurer and make enquiries as soon as possible.
If left unattended, it will be assumed that the information has been accepted by you as correct and this may affect you at claim stage.
The cover provided by an insurer will vary depending on the type of policy, what the insured’s needs are and how much the insured is willing to pay in premiums on a monthly basis.
The following are some of the most common types of insurance policies you can expect to find in the insurance market:
Motor vehicle cover:
There are traditionally three kinds of motor vehicle covers and these are:
- Comprehensive cover – a comprehensive motor vehicle policy provides cover for a wide range of losses or damage to a motor vehicle, such as loss or damage caused by storm, fire, accidents, hijacking, theft and damage to a third party’s vehicle or property , if there is a third party.
- Third party, fire and theft cover – this type of cover only covers loss or damage caused to your vehicle as a result of a theft, hi-jacking, fire and covers an insured against any loss or damage the insured caused to a third party. However, if you take out this cover, you are not covered for accident damage to your own vehicle.
- Third party cover – the cover here is limited to damage or loss suffered by the third party to his or her vehicle as a result of an accident caused by your vehicle. Here again, you are not covered for the damage to your own vehicle.
Home contents cover:
Home contents or household cover will cover you for loss or damage to the possessions in your home, caused by certain listed events. It is important to keep proof of purchases and/or evidence of ownership of items as your insurer will request this evidence should you claim for the loss of these items. Under this type of insurance you have to take care that you insure your contents for their replacement value and you may be required to specify certain valuables separately, such as jewellery items, as per the terms and conditions of the policy.
Homeowners cover:
A comprehensive building insurance policy protects your home from the risk of structural damage such as fire and storm damage. This type of policy covers everything that is permanently fixed and immovable within the boundary of the insured premises, including permanent fixtures such as doors and windows.
Most homeowners insurance policies list the covered events and the excluded events. These types of policies generally exclude any damage arising from a lack of maintenance, wear and tear and damage that has occurred over a period of time.
Cell phone cover:
Considering the heavy reliance that people nowadays place on their cell phones, a cell phone insurance policy can be considered a necessity.
This type of policy covers you against the theft of your cell phone. Besides theft, being an electronic gadget, cell phones are prone to hardware and software damage or malfunction. Depending on the policy you take out, you can get a replacement for your damaged phone or the phone can be repaired by your insurer.
As with any other insurance policy, make sure that you check the policy for what is covered and what is not covered, in other words excluded.
Is cheaper better?
As a first time insured, chances are that you will be thinking about what you can afford to pay for insurance. Always keep in mind that when it comes to insurance, you are only covered for what you pay for.
Your premiums are based on your risk profile but you can try to negotiate your monthly premium with your insurer. Where you and your insurer cannot reach an agreement on the premium, then you may elect to shop around.
A low premium may mean less cover when you claim.
Some insurers are able to keep premiums lower by having policyholders pay high excesses at claim stage.
An excess is the first portion of a claim that you are liable for. Always bear in mind what portion of a claim you can afford to pay when you claim. Would it suit you better to pay a higher monthly premium and a lower excess at claim stage or a lower monthly premium and higher excess at claim stage?
Remember, insurance can be simplified by asking questions and ensuring that you provide honest and correct information at all times.
[ Insurance concepts as explained by the Office of the Ombudsman]
Also view:
Car Insurance Advice, Education and Road Safety