Getting insurance cover for one’s assets is commonly seen by many as a grudge purchase, the good news however is that you are assured that your assets are well covered to face the worst of unforeseen circumstances.
Very few of us read through the fine print in our insurance contracts, which differs significantly between policies and insurers. In some instances, it’s only when we need to submit a claim, that we learn about a missed clause that we have not adhered to or an exclusion, resulting in a possible rejected claim. Here are 10 ways to avoid that mistake:
Wear and Tear – This is where items have a life span and once that time has been reached, it breaks or no longer works effectively. This is not covered by the policy and is noted as an exclusion. For example, buildings need to have water proofing on the roof, as they’re exposed to sun and harsh weather conditions, these generally perish after two years. If your roof leaks following a storm, due to this wear and tear, your policy will not cover the water proofing. Depending on your policy wording, the resultant damage may or may not be covered.
Maintenance – This is the general upkeep of your property or items. Failure to do this will result in a rejection as this is a specific exclusion. For example, tree roots cause damage to pipes, drains, paving, walls or your motor vehicle must be serviced annually.
Defective workmanship/ materials used – This is specifically excluded. For example, the contractor builds a wall, fails to follow South African building regulations or mixes the building materials incorrectly and the wall collapses.
No cover – This is where an incident has occurred, but the policy does not provide the cover for this event. Events that are commonly insured are fire, wind, storm, hail, theft but some events may or may not be included such as accidental damage and power surge. A claim for accidental cover, where this has not been selected, will result in ’no cover’.
Non-Disclosure – Failure to notify your broker or insurer of relevant changes that may increase the risk of acceptance for the policy to respond to may result in your claim being rejected. For example, a tenant occupies your property which you have disclosed. After a couple of months, the tenant moves out of your property and is vacant (no signs of anyone living there by way of visiting the premises, lack of furniture). This change in risk has not been disclosed. Should vagrants move in or damages are caused to the property, this could result in a rejection of your claim.
Late notification – The insured has 30 days to report a potential claim to the insurer/broker. Failure to do so may prejudice the insurer’s ability to assess the claim and result in a rejection.
No insurable interest – The interests of all parties must be noted on the policy for their respective rights and interests to be covered. If you do not have financial interest in an asset, you cannot insure it. For example, your friend’s car is registered in her name, but you are insuring it on your policy without notifying your insurer/broker of the insurable interests.
Unpaid premiums – If you place a stop order on your short-term insurance debit, this will result in an immediate cancellation and no cover will exist as your intention was not to pay the premium. If your debit order returns due to lack of funds, you are required in terms of legislation and your policy wording to pay this outstanding amount before the insurer will consider the claim.
Misrepresentation, dishonest or criminal behaviour – All these could draw serious consequences for the insured, to the extent that they could be blacklisted and may not be able to obtain insurance.
Avoidance of cover – In the event of fraud, misdescription, misrepresentation or non-disclosure of material facts, the insurer could cancel the policy with immediate effect or declare the policy null and void from inception date, resulting in the claim being rejected.
In order to avoid a situation where your claim could be rejected, it is important to familiarise yourself with the above-mentioned reasons, but also make sure that the terms and conditions are reviewed regularly. Following the claims procedures, complying with the time limitations and taking the necessary steps to avoid a loss are some of the important steps you can follow if you want your claim to be settled.
Words: Elizabeth Mountjoy, private wealth manager for FNB Insurance Brokers.