Ten questions to help avoid insurance surprises

Most people only find out that they are not insured for certain risks when a specific claim is rejected. This leads to bitterness and is often the main driver of people changing their insurer. Changing your insurer based on an emotional decision followi

Instead Gari Dombo, Managing Director, Alexander Forbes Insurance, says “to avoid claims rejection and structure effective and affordable risk cover it is critical to understand exactly which risks are, or aren’t, covered by your various insurance policies.”

Not bothering to read or understand the detail of what is or isn’t covered can waste money or expose people to risk in areas they thought were adequately covered, “simply because people didn’t take the time to understand or ask the right questions” says Dombo.

To help consumers understand the ins and outs of their policies, avoid both under and over-insurance and structure cover accurately to meet their real risks, all while keeping costs to a minimum, Dombo advises consumers to ask prospective insurers the following questions before purchasing a policy:

1. What is your claims repudiation rate?

2. What happens to my policy when a debit order bounces?

3. What is the liability limit for third parties under the motor, contents or buildings sections of the policy?

4. What happens if I am under insured?

5. Will you use a manufacturer-approved motor vehicle repairer if my vehicle is damaged?

6. Are the contents listed in my householders policy covered when there has not been forced entry into my buildings?

7. Do you have a flat, as opposed to a percentage based, motor excess on your policy and what is it?

8. Who is covered under my policy to drive my vehicle? Is it any licensed driver or only the named driver?

9. Do I have car hire extension under my policy? For how many days?

10. Can I use my vehicle for business purposes? Does the cover include driving to and from work?

If, after asking these questions, consumers decide that it is necessary to change their insurer, they should compare each point of the cover they currently have with the cover they are looking to replace it with as “there is often a significant difference between what various insurers include and exclude” says Dombo.

The best way to go about assessing a possible new insurance is to obtain a copy of the policy before you purchase it. This way, consumers can identify and highlight exactly where their existing cover offers a better solution and where it does not.

Critical areas to compare include:

· The risk events or perils covered. Are the two covers covering exactly the same things?

· The extensions and their limits. What else is covered and for how much?

· What is excluded in each cover? Are the exclusions different?

· Do the two covers each have excesses? Are the excesses the same?

Other common mistakes to watch out for when purchasing new or changing existing cover include:

Over- insuring. Consumers often insure for more than the value of the loss. Should a loss occur the insurer will only pay out the value of the loss and not more.

Duplicating cover. It is often found that consumers take out motor insurance with a new insurer, forgetting to instruct the old insurer to cancel their cover, effectively paying twice the same cover. “No matter how many policies you may have for a certain risk you can only claim up to the amount of your loss, and no more” warns Dombo.

Poor maintenance. Many consumers do not know that maintenance is not covered under their motor or any other policy. Since maintenance is considered gradual damage and is the consumer’s responsibility, motor as well as any other policies exclude mechanical breakdown, failure or loss attributed to poor maintenance. “Insurance only covers sudden, unforeseen accidental damage” explains Dombo.

Using price as the only comparison. When considering a policy, check that it covers every aspect that you need covered to the full extent that you require cover - and only then look at the cost of the cover. “Too many consumers only compare the price of different covers, often replacing fairly comprehensive covers with dangerously limited cover for the sake of saving R20 or R30 a month” says Dombo.

Most of all consumers should never be afraid to ask.

Insurers are legally obliged to detail the contents and limits of their covers in simple, easily understood, language. If anything is unclear the consumer has the right to a simple explanation without any information being withheld.

As such Dombo advises consumers to “take the time up front to ask about anything that they don’t understand and then request that the detail of the cover they have negotiated be confirmed in writing before they sign” concludes Dombo.