10 Tips for understanding insurance better

Short term insurance is often viewed as a grudge purchase by consumers, as people understand the principle behind taking out such cover but resent having to pay an additional sum to ensure that their possessions are covered.

According to Arnold van der Linde, Executive Chairman at IntegriSure, while most people often base their decision solely on price, one of the biggest causes of concern for consumers is whether the policy will pay out in the event of a claim.

“While it may be tempting to choose the lowest premium in the market, it is critical that consumers properly assess the extent of the cover being offered and whether this is sufficient to meet their needs.’

“Consumers are often urged to read the terms and conditions in their insurance policy, the reality is that very few people actually do this. Firstly because they make the mistake of believing that all insurance policies are the same, and secondly because they do not understand the terminology.”

As a result, van der Linde says it is important for consumers to understand the basics terns of insurance and what they mean. Below he provides his top 10 list of terms consumers should understand.

Excess

An excess is a levy that consumers must pay each time they submit an insurance claim. Consumers can negotiate a ‘voluntary excess’ which means structuring it to suit their own circumstances. For example, someone who does not drive very often could benefit from a lower monthly premium if they raise their excess. It should also be remembered that some insurers also apply different excesses for different drivers of a vehicle.

Excess waiver

For those who are more exposed to risk - e.g. someone who travels often and during peak hours and long distances - an excess waiver or buy-back may be a better option. This means that the premium may be higher but no excess, or a reduced excess, will be applied during a claim.

All Risks

A common mistake made by clients is not specifying valuable items separately under a policy. It is important to remember that any item carried outside the insured place of residence such as iPad’s, cameras and cell phones must be insured or specified separately.  If a client has an All-Risks policy then this will cover all insurance related risks – unless something has been specifically omitted in the policy.

Under insurance

Insurers always settle claims on an old for new basis, so it is crucial that the correct replacement values are used to determine the insured amount.  If the policyholder is underinsured, the value of any claim will be reduced with the proportionate value for which they were underinsured.

Over insurance

Clients who are over insured pay an unnecessarily high premium.  For example, in motor insurance, in the event of a total loss the insurer will only pay out the market related resale value of the vehicle.  As vehicles depreciate in value, clients should speak to their broker or insurer each year to reduce the value of the insured amount to lower their premiums.

Proof of ownership

Clients should always keep copies of proof of ownership of items that they have purchased in order to expedite the settlement of any claim. Receipts of purchases, manuals or photographic and electronic evidence is often a useful way to assist in having a claim dealt with in a fast and efficient manner.

Valuation certificates

Valuation certificates are often required for any items that are specified such as expensive jewellery. These values should be adjusted on a regular basis to ensure that the insured value keeps track with any increase in the value of the items.

Disclosure

Any relevant information that may affect the insurer’s view when calculating the risk that the policyholder poses must be disclosed upfront.  For example, if the regular driver of a vehicle is not the named driver, it is important to disclose this information.

Security measures

All security measures that are specified under your insurance contract must be in good working order at all times and be activated when you are away from home.  Most insurers provide discounts for security measures and if these are found not in working order or activated when a claim is submitted, the claim may be repudiated.

Car hire

Check with your broker or insurer if a car hire is included on your policy. Clients often forget that they will be stranded without transport in the event of a motor related claim.  Repairs to a vehicle can easily take 30 days. The cost of hiring a car is significant, while a car hire policy is often relatively inexpensive.