Consumers have less insurance cover than they think – FNBIB

Many consumers are exiting recession with less insurance cover than they think and risk claim repudiation or only partial settlement unless they beef up their policies.

The alert comes from FNB Insurance Brokers (FNBIB), short-term insurance arm of the First National Bank Group.

Debbie Barret, General Manager, Marketing at FNBIB, says many consumers are still under cash pressure following recession and “may be tempted into false economies by failing to review their policies”.

Unfortunately, many consumers put away their policies and forget about them, assuming full cover is available when it may be inadequate.

“Cover may not exist at all because the policyholder fails to take account of exclusions and restrictions,” says Barret. “It comes as a nasty surprise when the consumer is told he has to meet a claim out of his own pocket.”

To guard against costly surprises, FNBIB advises consumers to reread their policies, checking limits and exclusions. ‘Grey areas’ include:

Car hire: Free car hire may be available following a crash, theft or hijack, but exclusions or restrictions may apply; in which case you may not have the blanket cover you assumed or it may not last as long as you thought.

Credit cost cover: In the event of an accident involving a vehicle bought on credit, many policies cover the gap between market value and a vehicle’s value when credit charges and interest are included. If you are still paying for your vehicle, don’t assume gap cover like this is automatic. Make sure it is written into the policy or you could be liable for any shortfall.

Personal belongings: You risk partial settlement unless you update your policy to account for recently acquired items and inflation. Under-insurance is a major problem. Settlement reflects any mismatch between replacement cost and the amount of cover. If you took cover for R250 000 on your personal possessions that is the most you can expect, though the replacement cost may be R500 000. Some assume annual rate increases cover cost escalation. This is not so. Carry out an inventory of personal possessions and make sure appropriate cover is in place.

All risks: This cover applies to personal items that can be carried outside the home. Laptops and cell phones can be expensive to replace. Unless they are specifically itemised on the all-risks list, they are not covered. Also check jewellery and expensive branded goods like designer handbags.

Home-based business: Commercial public liability cover is necessary for the parts of the home that are used for business. General household insurance does not cover liability for loss, damage, negligence, injury or death involving business operations.

Home damage: Full householder cover is far from automatic. Home owners have a duty to ensure property is properly maintained. If you fail to maintain your roof and allow gutters and down-pipes to clog up, a claim for water damage during the rains might be repudiated.

Says Barret: “A broker familiar with you, your home and family can alert you to pitfalls like this. Build a credible personal relationship with your broker and you build a better understanding of your cover. It’s a great defence against nasty surprises when claims are made.”