Short term insurance is not exactly the most exciting topic, but it’s super important! And by short-term insurance I mean car insurance and household contents insurance. These are probably the most common and necessary insurances in this category.
A deal with the devil
Short term insurance has a bad reputation as you always hear the horror stories about when things are not paid, and how the insurer was “looking for ways” not to pay. This isn’t exactly fair, but some stories do seem rather pedantic or even outright awful. On the bright side, I had a great experience with my insurer last month when I had a burst geyser a few days before Christmas. Fast and professional service and all done with ease.
It must be remembered that insurance is a contract between yourself and your insurer. Both parties have obligations and responsibilities. The biggest responsibility of the insurer is to honour your claim.
Given that short-term insurance is a contract, actually reading the contract should be on your to-do list. The insurance contract, or policy, will outline exactly on what basis an insurer will and won’t pay for your financial loss. Now let’s be honest, have you actually even looked at your policy contract?
Given that your relationship with your insurer is a contractual one, differences of opinion as to what specific wording in the contract means, are not uncommon. Good insurers are generally the ones who go out of their way to find reasons to settle a claim as opposed to bad insurers who might try make repudiating (denying) your claims part of their business model. There is the ombudsman who will always investigate any treatment that you feel is unfair.
It’s good to know that policy documents are becoming easier to read with less complex wording, and you can always contact your insurer if something in the contract doesn’t make sense to you.
How to find a good short term insurer?
We’re lucky enough to live in the age of the internet, and everyone has a say about everything! It’s pretty easy to find public comment and opinion on various insurers, ones that people recommend versus ones that people advise against. Not all bad experiences are the insurers fault though as we (the clients) often don’t understand things or simply make assumptions which are not valid.
My advice would be to do some online research about an insurer, and look at reviews – the good and the bad. Speak to a trusted friend or colleague about their own insurance experiences, and speak to your financial planner. Insurance is really not that hard or complicated, and you can’t really get it wrong. As long as you read the policy, know what is covered and what is not, and that you are fully honest upfront!
You get what you pay for
When it comes to insurance, cheap is not necessarily the best. In fact, cheap likely means less cover and more risk on you.
Take a listen to this in-depth conversation about car insurance.
Fully loaded questions
The bulk of repudiated claims (claims that are not paid) are due to false of missing information that you give when taking out the claim.
As much as you wish to mitigate risk, the insurer has the same rights. So when they ask questions about claims history, value of items, etc, you need to be honest!
Each question asked by the insurer will have a very specific purpose, and if answered incorrectly can be used to not settle claims.
The classic example would be: Do you have burglar bars on all your opening windows?
You answer ‘yes’, but forget (or think it’s irrelevant) that one of your small bathroom windows has not yet had bars fitted as there was some annoying DIY that needed to be attended to first.
As life goes, a thief gains entry through that window and a loss occurs and the insurers don’t settle.
In all fairness though, incorrect underwriting can only be used to refuse a claim if the omission or error is a material fact to that claim. So if we take the same scenario above, but instead of the bathroom window, the thief gains entry by breaking through the bedroom window which did have burglar bars. The insurers may find that all information was not correctly disclosed, but the non-disclose itself had no bearing on the loss and thus can’t be used against the client.
To avoid any surprises though, rather be fully honest and disclose things which could affect your policy. It’s better to know the consequences upfront instead of when you’re in a pickle and needing to claim.
Move house, but didn’t move risk profile
Asking prospective clients a host of questions while taking them on as a client, is all about creating a risk profile for that client. Where you live, prior losses, your age – these all helps the insurer to charge you the correct premium and price their risk correctly.
If you move house, it could easily be that your underlying risk profile changes. It may be that your new area experiences more house burglary than your previous suburb, and as such, your insurer might choose to increase your premium. Without telling your insurer that you’re moving, they have no way to make such a determination.
It is not uncommon for an insurer to reject a claim where a change in risk profile of the client has arisen, and the insurer was unaware of such a change. Admittedly, this is generally in instances where there has been a material increase in risk (about a 10% increase).
Don’t worry about whether your new house increases or decreases your risk profile – rather just tell your insurer.
Don’t presume it’s covered
All too often, people assume that something is covered under their existing policy.
One of the biggest errors is the misunderstanding about what is included under household contents and what they are covered for. Certain insurers might exclude laptops and cellphones under house contents, while others will not cover accidental damage unless requested.
If you have valuable items such as collectable, antiques, art, Kruger Rands, silver bars, etc; find out the details of whether they are covered and if there are any specific conditions or requirements.
Conclusion
Admittedly, no-one has time to be worrying about policy wording in great detail. The easiest way to shortcut all of this without dropping the ball, is to find a great insurance advisor who can manage all your short-term insurance needs. A good advisor knows their products like no other, and will easily be able to give you guidance on what your change in circumstances means for your cover.
You DO NOT find great insurance advisors through simply calling an insurance call center. They are clearly biased and will sell you only their products. Find someone a little more independent.
And if you’re wondering, this is who I use for short term insurance. Don’t take my word for it though, do your own research.