Here are some hot tips designed to help you understand some of the legalities that apply to insurance policies ... critical things that you need to know right now to ensure that your claims are paid in the future!
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Why your insurance company may not pay ... continued from above
So often we hear from visitors to this website who have had problems in the past with insurance companies ... problems that could easily have been more satisfactorily resolved with a little "insider knowledge" on the subject. Insurer's dutyUnder the law the insurer has a legal obligation to inform you about the restrictions in the insurance policy. This must be done before you sign the application and the policy is issued. This means (in part) that: - you must be given a copy of the policy; and
- the wording of the policy must be clear and unambiguous; and
- you must be informed in writing, before the policy expires, whether the insurer wants to enter into a new policy.
Insurer failure to informThe insurer must send you a letter telling you that your policy is going to expire, and tell you in writing if they are prepared to renew the insurance contract. If they don't do this the policy continues, as long as you have not taken out other insurance in the meantime. Duty of disclosureNo matter what the type of insurance, it is crucial that you answer every question asked by the insurer when filling out your application for insurance. To the best of your ability you should answer accurately, without any attempt to evade a question or disguise the truth. This is called your "duty of disclosure". In the event that you do not answer fully and accurately, the insurer may be entitled to refuse any claim you make. Most problems of this type involve car insurance or income protection, so be especially careful when filling out an application for these types of insurance. Remember to check whether valuables such as jewellery must be individually disclosed in your contents insurance. Examples of duty of disclosureYou may not believe some issues are worth disclosing. For instance: - visits to the doctor for a previous flu when applying for income protection insurance;
- minor criminal offences;
- apparently minor traffic offences;
- previous rejections for insurance cover;
- previous claims for insurance due to a robbery.
In all these circumstances the failure to disclose might later affect your ability to claim on your policy. In general the test is whether the disclosure would have affected the insurer's decision to accept the risk (although it may only result in a higher premium). Nevertheless, the best advice is to disclose any circumstance that appears to be relevant. Innocent non-disclosureTo some extent the ramifications of non-disclosure will depend on whether it was innocent or not. If it is not innocent it may be considered fraudulent. The non-disclosure will be innocent (i.e. unintentional) if you honestly believe the fact was irrelevant to the risk of the insurer. On the other hand, it will be fraudulent if you knew it might be relevant and nevertheless did not disclose it. Reliance on non-disclosureIt is not unusual for a dispute to arise between the insured and the insurance company over the issue of non-disclosure. There are many factors that will contribute to an appraisal as to whether the insurance company can rely on the alleged non-disclosure to avoid a claim (or part of it): - was the fact allegedly not disclosed already known by the insurer? For instance, if a previous policy or claim made it clear that the insured had a previous history of heart complaints, the insurer may not be able to rely on it;
- did the insured only become aware of the fact after the policy had been accepted?;
- even if the non-disclosure was innocent, would the insurer have charged a higher premium or perhaps rejected the application? In this case the insurer may be able to reject a claim;
- was the disclosure made to an agent of the insurer? If so, it will still depend on how this was made and to whom.
You fail to renewIt is crucial that you renew your policy before the current one expires. If you don't you will not be covered for any losses you suffer. In some situations the insurer may agree to pay anyway, although this will often depend on the amount of the loss and the length of time you have held the insurance. However, you will not have the legal right to enforce the contract. Changed value of insured propertyYou will notice that the value of the insured property will sometimes change when you renew the property. For instance, it may increase due to inflation or decrease because of depreciation. You nevertheless must ensure that you inform the insurer of any changes to the value of your property. For instance: - you have renovated your home;
- you have changed your employment, which may mean you need more (or less) income protection cover.
Increased riskYou must inform the insurer if your circumstances have changed in the past 12 months. This includes anything that might reasonably increase the risk taken by your insurance company under your policy. For instance, if you have income protection insurance, you would be obliged to tell the insurer if you have suffered a heart attack in the past twelve months. Changes in terms of policyInsurers can change the terms of the policies, and you should be careful to ensure that you are aware of these changes. Usually you will receive a covering letter with the offer of renewal, but this may not always be the case. In some circumstances you will only become aware of the change if you compare the new policy to the existing one. If the changes effectively restricts your rights, and you were not notified, you may be able to challenge a failure of the company to pay a claim denied on the basis of the more restrictive terms. If the company will not agree to pay the claim you should seek legal advice.
Disclaimer:
The information contained above has been provided as a general
service. Any references to specific financial, legal, accounting, or
taxation issues are done so in the context of general information
and should not be relied upon as fact or construed as advice by the
us in any of these areas. You should consult a relevant financial,
legal, tax or accounting professional to assist in your particular
circumstance. |
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