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Know what you are (and aren't) insured for

Insurance

When entering into an insurance contract, it’s important that you fully understand it.

Having insurance in place does not mean that you are protected against any type of loss or damage. The loss or damage must be of a type specifically catered for in the policy.

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Deanne Wood, the Ombudsman for Short-term Insurance, says many people believe that, because they have taken out insurance, they are covered for any loss sustained to their property. This is not the case. The nature of a policy, the extent of indemnification and the full implications of the terms and conditions determine the extent to which cover is provided.

“We are often approached by consumers seeking assistance with claims that have been rejected by insurers because no insurable event has occurred.

“An insurable event is a particular type of event covered under a policy. Loss or damage caused by an event not covered under the policy, or that falls within an exclusion (which exempts the insurer from liability), cannot give rise to a valid claim,” Wood says.

“An overwhelming number of complaints lodged with our office are for rejected claims where the damage or loss was caused by an event not covered under the policy – for example, a lack of maintenance, gradual deterioration or wear and tear. Consumers often express frustration at having regularly paid a premium to the insurer but being denied assistance in their moment of need. What they fail to appreciate is that not all needs are covered by their policy.”

The following examples show the importance of having a good understanding of what you are covered for:

Lack of maintenance 

Shelley discovered a leaking pipe in her bathroom and lodged a claim. Her insurer rejected the claim because of an exclusion in the policy for leaks resulting from a lack of maintenance. Shelley disputed the decision, because she believed that, since the pipes were concealed in the wall, she was unable to maintain the pipes or detect any fault in them until the damage had arisen. She argued that, in order to meet the insurer’s maintenance requirements, she would have had to break open the wall regularly in order to check that the pipes were in good working order. This, she argued, could never have been the intention of the policy.

What Shelley did not appreciate was that the intention of the policy was only to provide cover in certain limited circumstances. The ongoing maintenance of the pipes was a risk that she, not the insurer, bore.

Defective design or construction

During a hail storm, the tiles on Thabo’s roof cracked and some blew away, resulting in water leaking through the roof and damaging the ceiling boards. Thabo submitted an insurance claim for the damage.

On inspection, the insurer discovered that the tiles had cracked and blown away because they had not been attached together properly when the roof was built. A well-built roof would have been able to withstand a storm of that nature, the insurer said.

Thabo’s insurer rejected his claim because the roof had been badly constructed. In this case, the risk the insurance company had accepted was for damage caused by hail or rain. Thabo was not covered for damage resulting from defective construction.

Limited cover for water loss because of a leak 

Mohammed submitted a claim for water loss when he discovered that a pipe on his property had been leaking for five months. His insurer accepted the claim, but Mohammed was not satisfied with the settlement offer. He believed his insurer had calculated the water loss incorrectly, because it had not accounted for the water loss from when the leak had started.

The water loss was calculated using a formula set out in his policy. The formula specifically limited cover to two metering periods: the period immediately prior to the date of the repair of the leak and the period during which the leak was repaired. The insurer was therefore entitled to pay for two months’ loss only.

No visible signs of forced entry in the case of theft 

On returning to her vehicle at a shopping centre, Akila noticed that her laptop had been stolen out of her car. She lodged a claim with her insurer under the all-risks section of her policy.

An investigation revealed that the thieves had used a remote-control jamming device to prevent her vehicle from locking. Her claim was rejected because there were no visible signs of forced entry into the car.

In this case, the risk that the insurer had accepted was for theft only where there are visible signs of forced entry. Theft through the use of a remote-control jamming device is a different type of risk and was not covered in Akila’s policy.

Insured SIM card not in insured cellphone

David owned a cellphone and a tablet computer. David’s cellphone was stolen while the insured SIM card was being used in the tablet. David explained that being accessible at all times is a crucial aspect of his business. Therefore, if his cellphone battery dies and he is unable to charge it, he puts the SIM card in the tablet. According to David, this happened only rarely.

Due to an express term of the policy stipulating that cover would apply only if the insured SIM was in the insured cell phone at the time of loss, David’s insurer rejected his claim.


DON'T BE CAUGHT BY SURPRISE

Your insurance policy consists of the schedule and the terms and conditions (often a separate document). “Don’t just glance through the policy,” Wood says. “Take note of important, but often overlooked, details, such as the inception date and period of cover, the specific circumstances in which cover is provided, the exclusions, the class or type of policy, the effect of non-payment of the premium, the excesses that apply, the commission or brokerage fees, and details of the manner in which to submit a claim or cancel the policy.”

Your insurer is obliged to set out the policy terms in plain language that is clear and understandable. If the terms are not clear, contact your broker or insurance company.

“As with any contract, there are obligations placed on both parties. Consumers must ensure that they understand and comply with their obligations under the policy,” Wood says.


THE OFFICE OF THE OMBUDSMAN

The office of the Ombudsman for Short-term Insurance is an independent body appointed to serve the public and the short-term insurance industry. By applying the law and principles of fairness and equity, it resolves disputes between short-term insurance companies and their clients. For further information, phone 011 726 8900 or email [email protected]. Website: www.osti.co.za. Twitter: @Ombud4ShortTerm

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