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\u00a0<\/span><\/p>\n Article as published in the Sunday Times (Personal Finance) on 4 August 2013:<\/span><\/p>\n By Angelique Arde<\/span><\/em><\/p>\n <\/span><\/em><\/p>\n Being ignorant of the terms and conditions (Ts and Cs) of your short-term insurance policy is more likely to trip you up than a loophole in the policy itself. And you usually only get to terms with the Ts and Cs when it\u2019s too late \u2013 when your claim has been rejected.<\/p>\n At a recent meeting of the Acsis\/Personal Finance Financial Planning Club, Dennis Jooste, the Ombudsman for Short-term Insurance, revealed the most common reasons for short-term insurers rejecting claims for motor, contents and homeowner\u2019s cover, which in many cases involve ignorance of the Ts and Cs. <\/span><\/p>\n Jooste says more than half of all complaints to his office involve motor claims. Here\u2019s why most motor claims are repudiated. <\/span><\/p>\n 1. Unlicensed driver. <\/span><\/strong><\/span><\/p>\n 2. Unroadworthy vehicle: <\/span><\/strong><\/p>\n If you have an accident and your insurer finds out your wipers didn\u2019t work or your tyres were smooth, your claim could be rejected on the basis of your car being in an unroadworthy state.<\/span><\/p>\n 3. Reckless driving:\u00a0<\/span><\/strong><\/p>\n Watch out for the \u201cFailure to take care\u201d clause, Jooste says. \u201cThis refers to recklessness, which is not to be confused with negligence.\u201d Also look out for a \u201cBreach of road traffic regulations\u201d clause. If you were exceeding the speed limit at the time of an accident, your claim could be rejected. <\/span><\/p>\n 4. Drunk driving.<\/span><\/strong> <\/span><\/p>\n 5. Driver not the \u201cregular driver\u201d:\u00a0<\/span><\/strong><\/p>\n Some policies cover the regular driver only. Others cover a named driver or any licensed driver. Jooste says misrepresentation by policyholders in this instance is common. Since young drivers pay higher premiums because of the risk they pose to the insurer, they may list a parent as the regular driver. When it is revealed that this isn\u2019t true, the claim may be repudiated. <\/span><\/p>\n 6. Total-loss policy:<\/span><\/strong><\/p>\n \u00a0<\/span><\/strong>This cover applies only when the insurer deems your vehicle to be a total write-off. Sometimes policyholders have this type of cover and only realise it when their claim is rejected, Jooste says <\/span><\/p>\n 7. Telematics data shows driver fault:<\/span><\/strong><\/p>\n \u00a0<\/span><\/strong>Telematics is technology that can be used to track and recover your vehicle if it is stolen, and\/or monitor your driving behaviour. Jooste says that some insurers insist on you fitting a telematics device to your vehicle. \u201cThe data gleaned from a telematics device can show a breach of speed limit or reckless driving leading up to an accident, which can result in your claim being rejected \u2013 and it is difficult to dispute the evidence,\u201d he says. But some insurers use telematics to reward good driving. In other words, telematics can be used as a carrot or a stick. \u201cMake sure you know how the insurer is going to use this information,\u201d Jooste says. <\/span><\/p>\n 8. Tracker device not fitted:<\/span><\/strong><\/p>\n \u00a0Jooste says that if your cover is conditional on your car being fitted with a satellite tracking device, your claim will \u201cprobably\u201d be rejected if you fail to comply with this condition. <\/span><\/p>\n 9. Vehicle inspection not carried out:<\/span><\/strong><\/p>\n \u00a0<\/span><\/strong>Jooste says some insurers insist on inspecting your vehicle at inception of the policy. This is so that there can be no disputes about pre-existing damage to the vehicle. If you neglect to comply, you will be in breach of your contract and can have your claim rejected. <\/span><\/p>\n 10. Material non-disclosure at underwriting stage:<\/span><\/strong><\/p>\n \u00a0<\/span><\/strong>Jooste says your claims record, a break in insurance cover, prior applications for cover being rejected, and judgments on your credit record are all material to the assessment of your risk, and it is imperative that you disclose such information. For example, people with a bad credit record have a higher propensity to file fraudulent claims than people with a clean credit record, he says. \u201cIf you lie and it comes out later, your claim may be rejected.\u201d <\/span><\/p>\n 11. Vehicle used for business:\u00a0<\/span><\/strong>If you plan to use your vehicle for business, you need to disclose this to your insurer. \u201cIn my experience, insurers are very reasonable about this, and don\u2019t look to load your premium if you seldom use your vehicle for this reason.\u201d <\/span><\/p>\n 12. Vehicle not parked securely at night:<\/span><\/strong><\/p>\n \u00a0<\/span><\/strong>If you state that your car is parked securely \u2013 in a garage or off the street \u2013 at night, and, in the event of theft, it is found it was regularly in the street, your claim could be rejected. <\/span><\/p>\n 13. Security device not fitted:\u00a0<\/span><\/strong><\/p>\n If you\u2019re required to have your car fitted with an alarm or a gear lock and you don\u2019t comply, your claim can be rejected. <\/span><\/p>\n Homeowner\u2019s insurance<\/span><\/strong> <\/span><\/p>\n Homeowner\u2019s insurance is cover for your home (the building, not the contents). \u201cRemember that the insured value is not what you could get if you sold your property; it is for the cost of replacing or rebuilding your home at today\u2019s values. Beware of relying on bank valuations,\u201d Jooste says. Even if the insurer is associated with a bank, make sure your home is not undervalued. <\/span><\/p>\n Jooste lists the following reasons for homeowner\u2019s insurance disputes: <\/span><\/p>\n 14. A peril you aren\u2019t covered for caused the loss:<\/span><\/strong><\/p>\n If your loss was the result of \u201cgradual deterioration\u201d and \u201cmaintenance\u201d issues, you aren\u2019t covered, Jooste says. Homeowner\u2019s insurance typically covers you for storm and fire damage. <\/span><\/p>\n 15. Poor design and faulty workmanship:<\/span><\/strong><\/p>\n These are usually not covered. <\/span><\/p>\n 16. Retaining walls not built to acceptable standards:<\/span><\/strong><\/p>\n Retaining walls have to be built according to engineering specifications, Jooste says. So if a landscaper \u2013 and not an engineer \u2013 built your retaining wall and it collapses, your insurer might not pay out. <\/span><\/p>\n 17.<\/span><\/strong> Subsidence:<\/strong><\/span><\/p>\n If your house is built on clay, cover for subsidence is \u201cnormally excluded\u201d, Jooste says. <\/span><\/p>\n 18. Unoccupied premises:<\/span><\/strong><\/p>\n \u201cIf you leave your home unoccupied for, say, 30 days, without advising your insurer, it could have grounds to repudiate a claim,\u201d Jooste says. <\/span><\/p>\n 19. Moveables not covered:<\/span><\/strong><\/p>\n There are often disputes over what is a fixture, which is immovable, and what is a moveable item. Homeowner\u2019s insurance covers you for permanent fixtures only. <\/span><\/p>\n Contents cover<\/span><\/strong> <\/span><\/p>\n Most claims for contents cover are rejected on the basis of the average clause (See \u201cGeneral principles of insurance\u201d) because policyholders tend to under-insure, Jooste says. <\/span><\/p>\n 20. Inflated and fraudulent claims:<\/span><\/strong><\/p>\n This is a big problem in the industry, Jooste says. \u201cDon\u2019t inflate your claims. Most policies carry a forfeiture clause, so if you are caught out, you may have to forfeit all benefits under the policy \u2013 in other words, the insurer is entitled to repudiate the entire claim,\u201d he says. <\/span><\/p>\n GENERAL PRINCIPLES OF INSURANCE<\/span><\/strong> <\/span><\/p>\n As a policyholder, you need to understand some general principles of insurance, Dennis Jooste, the Ombudsman for Short-term Insurance, says. These are: <\/span><\/p>\n * Utmost good faith. \u201cInsurance is based on utmost good faith. When you enter into a contract with an insurer, you are asking the insurer to assume the risks that we all face in our everyday lives. The insurer knows nothing about you. Your premium is going to be determined by the insurer based on your risk profile. This is where utmost faith comes in.\u201d <\/span><\/p>\n * Full disclosure. \u201cIn assessing your risk profile, the insurer relies on you to make full disclosure of all material information,\u201d Jooste says. \u201cThis is why it\u2019s so important that you are honest when you take out insurance, and maintain this honesty throughout your relationship with the insurer. Otherwise, come claims stage, the insurer may say, \u2018but you didn\u2019t disclose that fact to me and therefore I couldn\u2019t assess the risk properly\u2019.\u201d Also bear in mind that insurers share information, he says. The consequences of material non-disclosure at application stage is that your policy becomes \u201cvoidable\u201d, resulting in you having no cover when it comes to light that you did not make full disclosure. <\/span><\/p>\n * Insurable interest. You can\u2019t insure something in which you don\u2019t have an interest. \u201cIf you own something, you have \u2018an interest\u2019,\u201d says Jooste. \u201cFor example, when adult children move back home and bring with them their own assets, which they don\u2019t bother to insure, problems arise. They assume their assets will be covered by their parents\u2019 insurer. The bad news is they are not covered by dad\u2019s insurance, because dad doesn\u2019t have an insurable interest in the property.\u201d <\/span><\/p>\n * The \u201caverage\u201d clause. This requires that you insure your assets at their full value. If the sum insured at the time of the loss is less than the insurable value of the property, the amount claimed will be reduced in proportion to the under-insurance. Jooste says most people don\u2019t have adequate cover for their household contents and don\u2019t realise the consequences of this. If you have household contents to the value of R800 000, which you have insured for R500,000, and you suffer a R100 000 loss, you might think you\u2019re adequately insured. Not so, he says. Your insurer can penalise you for being under-insured and can pay you out in terms of the \u201caverage\u201d. \u201cIn this case, it may pay you out five-eighths of R100 000. That\u2019s how average works,\u201d he says. Jooste says it\u2019s important to revalue your assets annually to ensure you have sufficient cover. <\/span><\/p>\n There are companies that specialise in valuations and can give you a valuation for each and every item you have, Jooste says. This provides clarity on their value. \u201cAt claims stage, some insurers want proof of purchase, such as an invoice. Be aware that the onus is on you to prove your loss,\u201d he says. <\/span><\/p>\n Jooste advises that you take photographs of each item in your home and save them to a disc or external hard drive. <\/span><\/p>\n * Enforceable contract. The policy is an enforceable contract subject to its terms and conditions, and any ambiguities in the policy will be interpreted against the insurer, Jooste says. <\/span><\/p>\n On taking out a motor policy<\/span><\/strong> <\/span><\/p>\n When taking out motor insurance, Jooste says you need to be mindful of the following: <\/span><\/p>\n * Valuation. Pay careful attention to how the insurer values your car: at retail value (the price at which a dealer will sell a vehicle to a consumer), trade value (the price a dealer will pay you for your vehicle), or market value (generally the mid-point between trade and retail). These values affect the premium you pay and what the insurer will pay out when you claim. A vehicle is a \u201cwasting asset\u201d, which means you need to revalue it on a regular basis, Jooste says. Although short-term insurers might soon be compelled to annually assess the value of your motor vehicle and set your premiums accordingly \u2013 rather than merely increase your premiums in line with inflation \u2013 until this happens, it is your responsibility to make sure you aren\u2019t over-insured. <\/span><\/p>\n * \u201cNo water damage\u201d. Watch out for this exclusion, Jooste says. \u201cDuring a Highveld thunderstorm, I drove into a dip and the water level rose so high that it flooded my engine and blew it. Fortunately it was covered, but some insurance companies exclude water damage to an engine. So be careful of that exclusion,\u201d he says. <\/span><\/p>\n * Excesses. \u201cBe aware of multiple excesses,\u201d Jooste says. Some policies apply multiple excesses, meaning that in addition to your standard excess others may apply. For example, young or new drivers who haven\u2019t had a license for a certain number of years, can be liable for an additional excess. If you have an accident within six months of obtaining cover, or between midnight and 6am \u2013 the most dangerous time on the road \u2013 an extra excess may apply. And some insurers levy an additional excess on drivers older than a certain age. <\/span><\/p>\n Jooste\u2019s advice: \u201cGo home and read your policy. If there is anything that you don\u2019t understand, ask your broker or insurer to explain it to you.\u201d <\/span><\/p>\n Contact the ombud<\/span><\/strong> <\/span><\/p>\n The role of the office of the Ombudsman for Short-term Insurance is to provide an independent, fair and cheap dispute-resolution service to the public. If you have a complaint against your insurer, you can contact the ombudsman on telephone 011 726 8900 or sharecall 0860 726 5501, fax number 011 726 5501 or email info@osti.co.za. For more about his office, go to <\/span>www.osti.co.za<\/a><\/span><\/a><\/span>.<\/span><\/p>\n