One thing we haven’t talked much about here at WellSpent is short-term insurance. Not that it isn’t important – far from it. We had up until now just naively assumed that it was a straight-forward financial product: pay your premiums and hope you don’t crash your car.
One of the Editors at WellSpent recently changed their short-term insurer, on the advice of someone who had made the mastery of short-term insurance their personal obsession. We don’t know why. Different strokes for different folks.
We figured there must be more to insurance than sitting on hold, not claiming because you’ll lose some kind of bonus, and not claiming because the excess is…excessive.
So we asked the aforementioned Zen Master a simple question.
What’s the worst way to get short-term insurance?
** My Zen Master’s name is Dryden Doughty, from Origin Financial Services
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.
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.
How to find a good insurer?
Insurers’ percentage of claims paid of those submitted are public knowledge. The office of the Short Term Insurance Ombudsman also publishes annual data showing the number (and percentage) of complaints brought against various insurers.
In a perfect world, we’d read the full policy wording, but we understand that this is pretty boring. So in the spirit of keeping your attention long enough to leave you with something useful, commit yourself to at least doing the following:
Avoid the likelihood of any differences of opinion arising around your policy wording by specifically commenting on ‘previous claims or losses’.
All insurers ask this very loaded question. Most clients remember the accident from last year but very few remember or mention the lost cellphone from two years ago, especially as it wasn’t worth your while to even claim. If an insurer finds out about previous claims or losses that were not disclosed at the time you entered into your contract, they have grounds to void the entire policy.
‘Void’ is just another way of saying ‘not legally binding’, or ‘completely empty’, like your lounge after being robbed. Insurers can and will refuse your claim, should you have (even by mistake) misrepresented your prior losses and claims.
Some insurers will try and identify such prior losses at the start of the policy, while others only bother at claim stage. Better to consider an insurer who leaves nothing to the point in time, where it might be too late.
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.
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.
Most policies require that when any loss arises, the insurer be notified within 30 days; minor damage is not regarded as important and therefore only attended to later.
If you’re lucky you’ll find yourself a lenient insurer who can look over this if good reasons present themselves, but don’t expect it – insurers are in the business of making money.
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.
This writer personally finds this particular issue incredibly boring. Just send a mail to your insurance broker or financial advisor, let them know about your new shiny iPhone 6S, and make it someone else’s problem.
Admittedly, this writer doesn’t have the 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 calling OutSurance. While OutSurance does enjoy a good reputation as being an insurer who experiences one of the lowest levels of complaints to the Short Term Insurance Ombudsman, I have found their heavy selling tactics, and shameless attempts at preventing you from dropping them as an insurer, quite a caustic experience.
I now enjoy a great relationship with my insurance Zen Master, who answers my questions via email in next to no time, and makes sure that I don’t screw up my insurance.