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Read between the lines

A BLURB: An insurance cover is only as good as its exclusions. A clear understanding of precisely what your policy doesn’t cover will, therefore, shield you from unpleasant surprises.

 INTRO: Take some time off to read the terms and conditions of your insurance policy before signing on the dotted line, urges Sandi Saxena.

 “I was told this by the sales representative and so I signed” Let’s be honest how many of us just sign papers for bank loans, insurance companies, investments, sales agreements and the likes, without as much as glancing at the fine print. All I can say is if you are foolish enough to commit on the dotted line based on someone’s promise, you have to simply brace up to bear the consequences!

 Let’s take a closer look at the insurance business:

Insurance acts as a cushion that covers your risks and protects you. But like many financial products, your cover — be it life, health, motor, property  or householder’s policies to name just a few, come with fine print exclusions that could, in some cases, lead to the rejection of your claims on technical grounds. Every insurance policy has four parts: Declarations, insuring agreements, exclusions, and conditions. Insurance policies contain many common words that have special meaning within the context of insurance. Most policies contain “Definitions” where they explain the special meaning of the designated words.

An insurance policy begins by declaring what it covers and then proceeds to restrict, limit, and exclude coverages. Therefore, you cannot just read the insuring agreements to understand the coverage. You must read the entire policy and refer back to the various insuring agreements and other provisions.

The more common types of insurances are Life, Property, Car, and Health.

 Life insurance is a simple product. Generally speaking it pays out if you die. Some insurers may exclude certain people in certain circumstances if they are deemed to present too great a risk.

An insurer may list other situations in which it might not pay out, for example if the insured party was in some way culpable for their own death, some policies will not pay out under the following circumstances:

  • If the insured party’s death is due to alcohol or drug misuse.
  • If the death occurs as a result of involvement in war or terrorism.
  • If the death is the result of suicide or self-inflicted injuries.
  • If the death is the result of gross negligence or a similarly reckless act.

 Full disclosure

Insurers have the right to cancel any type of policy if they find that a customer has not disclosed “all material facts” when applying for cover. With life insurance, applicants must be honest enough to tell insurers about any serious health problems.

Other clauses in your policy’s terms that you should check are premium levels–are these guaranteed to remain level for the duration of the policy? Can the insurer reassess them after a fixed period of time? The cost of cover can increase substantially if you have suffered any health problems in the interim.

 Household insurance

This policy covers the entire range of risks that a householder would wish to cover–loss or damage to the building and its contents, burglary, risks to jewelry and valuables, glass, domestic appliances, baggage, and so on. Here are some twists you should look out for:

 For the building and its contents, only the contents mentioned in the policy are covered; loss or damage to livestock and pets is not accounted for. Nor is damage to jewelry and valuables due to cracking, scratching or breakage of parts, and breakage of plate glass during removal and/or repairs, disfiguring or scratching of glass other than fractures extending through the entire thickness of the glass. The cover for breakdown of appliances and television excludes damage to external fittings like antenna and cost of transport to and from the repair shop.

 Motor Insurance

Comprehensive or Third-party liability: Claims can be rejected if the person driving the vehicle at the time of accident does not have a valid driving license or was drunk, or if the policy premium has not been paid beyond the grace period. Some policies do not insure cars when driven off-road. This might include parking your vehicle on the sand behind the building. Even if an insurance policy insures vehicles for off-road driving, don’t expect it to apply if you damage your 4 wheel drive SUV while dune-bashing in the sand behind your house! Drinking + driving + crashing = no insurance (including the AED 200,000 blood money you have to pay if someone dies).

 Medical Insurance

Most health insurance plans don’t cover pre-existing diseases or injuries at the time of taking the cover–non-allopathic medication, congenital diseases, and cosmetic/aesthetic or related treatment, pregnancy, dental and eye test.

 Other slippery places

Software agreements: Given the multi million-dollar costs of today’s software deals, customers often devote surprisingly little time and resources to scrutiny of contracts that are rife with obscure terminology, vague expansion charges, and mind-boggling license conversions. As a result, they end up paying in ways they had never imagined long after the deal is signed.

 Exclusions

Every insurance policy has exclusions or policy provisions that eliminate coverage for specified exposures. Exclusions clarify the coverages granted by the policy. Most policies have a section entitled, “Exclusions.” However, an exclusionary provision can be anywhere in the policy.

 Conditions

Within an insurance policy there are various promises made by the insurance company. The company will impose certain requirements or conditions on the insured, such as premium payment or duties to follow after a loss.

BOX

Before buying any coverage try and follow the checklist:

  1.  Does the insuring agreement cover each expected claim?
  2. Is there any exclusion or other provision that eliminates or restricts coverage?
  3. Are there any exclusion exceptions that restore coverage?
  4. What policy conditions must the organization comply with?
  5. Are the people or operations affected by the conditions aware of them? For example, if the policy requires that a burglar alarm always be operational, have you informed the office manager, maintenance staff, or other appropriate personnel?
  6. If the loss is covered, is it deductible? How much is it?
  7. How much will the policy pay for each loss?

Taking the time now to understand your policies can pay off in the long run. So sit back, relax, and try to enjoy the reading!

About SPI Group

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