Read insurance policies properly

FOR many people insurance is a "grudge" buy. They need cover, but don't like it, especially when there's a claim that they feel is legitimate, but turns out to be problematic.

I recently received a renewal notice letter for my household, all risks and motor policy. The document was 14 pages long and I was advised to read through it very carefully.

Some of the concerning conditions I noted were:

a) New burglar alarm conditions;

b) It is necessary for all sliding doors in my home to have a security gate or be fitted with a second lock that is key operated or uses a locking pin. All windows and openings must be burglar proofed;

c) If I leave my home, there needs to be an alarm in working condition, linked to armed response and activated. What happens if one forgets to activate the alarm and a loss occurs? Different policies have different conditions;

d) Motor vehicles need to have precise, factory-fitted immobilisers, the security installed has to comply with exact standards and you need confirmation from your insurer that they are satisfied; and

e) The excesses applicable to all aspects of the policy have been increased.

Not all policies are the same. For example, if your vehicle is a write-off, the basis of settlement could vary enormously between retail, market and trade-in value. How many people understand the repair philosophy of the insurer following an accident or when you are entitled to the replacement value of a car, particularly in the first year of registration? And what about car hire?

You should also establish whether insurers settle the full amount if the car is bought on lease or HP, if written off or would you be left with additional debt because of the finance charges? The policy also stated that all drivers must be named.

The responsibility is on the insured to provide all the information to the insurers. Even more important is the provision of material information relating to the risk. How many people fully understand what is material and what isn't? For example: The importance of notifying a change of address providing a change of address when ensuring the correct use of a car, that is business vs domestic.

Recently there has been a big shift to buying insurance direct. There is a belief that it's cheaper, faster and better to buy over the phone than through a broker. But you might not be comparing like-for-like products and decisions should not be based on price alone. Be aware of all issues and ensure that you disclose all relevant information, irrespective of how trivial you may believe this to be.

Read your policy from cover to cover to understand endorsements and exclusions. Always exercise due care and precaution to minimise losses and disclose everything. This is especially critical if you've had any judgements against you, if you've been refused insurance, it has been cancelled or you have been declared insolvent. These are essential disclosures as the foundation of insurance is based on utmost good faith.

The more information you provide , the greater your chances are of being offered a lower premium and the less chance of you being disappointment when you find out the cover was not as expected and your claim is repudiated.

  • The writer is financial financial adviser of Bryan Hirsch Colley and Associates. Phone 011-880-4888 or email bryanh@bhca.co.za

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