Structure of An Insurance Policy Simplified: Untangling that Insurance wording

The Insurance Policy
Once an insurance contract is agreed, a record of the agreed terms is captured in a document called a 'policy'. The policy is not the contract but only the evidence of the contract. In the event of a dispute relating to the particular policy contract, the courts will refer to the policy for clarification on the agreement or intentions of the parties.

It is often said that we are only able to realise the benefit of any insurance policy when a claim arises.It is at this point that we dust the policy document and look at it in detail.

Interpreting The Insurance Policy
The secret to interpreting the wording/content of an insurance policy and not rely solely on the interpretation of another individual is to view the document as consisting of distinguishable sections.  
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Most people are put off by a bulky policy document and in an attempt to understand the content of an insurance policy at once become even more flustered.

Each insurer has its own standard policy wording for different classes of insurance and in some cases, similarities exist between insurers' policies due to established market practices. Each new policy is personalised to the policyholder by the inclusion of details of the new customer.

Traditionally the form of policy document commonly used by insurers was the scheduled policy. In response to criticism of the 'unfriendly' wording / language adopted in these old insurance policy documents, insurers have radically changed the presentation of insurance policies.

However the basic theme remains the same and once anyone reading an insurance policy is able to discern the following main sections of an insurance policy document, comprehending same become a lot easier.
The main parts of an insurance policy are
The heading
The preamble
The operative clause
Exceptions
Conditions

   -Implied conditions
   -Express Conditions [General or particular]
The policy schedule

The heading identifies the class of policy and all policy documents will conspicuously display this. As pointed out above insurers have made great progress in redesigning the presentation of policy documents and one such change involves expunging the preamble from most contracts. 
The preamble clause is the part of the document which makes reference to the insured having paid the premium and the proposal form signed by the insured being the basis of the contract.

The use of the proposal form is fast being consigned to history as insurers now look to other more customer friendly methods of eliciting information needed to underwrite a risk.

With the growing popularity of payment of premium by instalments, the first part of the preamble clause has somewhat also become inconsequential.                

The operative clause is the section of the policy which details the type of event insured against. As well as ensuring that the event(s) mentioned under the operative clause includes those originally contemplated by the parties, the insured or his representative must also make certain that they fully comprehend the policy exclusions/exceptions.     © InsuranceInBoldPrints

Exclusions /Exceptions of a policy detail the instances in which the policy will not operate. Some of these exceptions are particular to the type of the policy being insured while others apply to almost all policies. Every section of the policy document is important but it is vital that as the insured you familiarise yourself with the excepted risks and the policy conditions.

Finally the Schedule of the policy which records the details of the particular contract. Most insurers have pre-printed policy documents for every class and use the schedule to personalise the policy to individual customers noting any agreed revisions to the standard document.

When buying insurance, if you decide to compare quotes using comparison sites, do not be influenced solely by Price.

Benefits Of Using The Services Of An Insurance Broker

Intermediaries
Insurance brokers act as intermediaries for the insured but usually remunerated by a commission from the insurer. They are full-time intermediaries offering insurance service on the basis of professional expertise and competence.

The key function of the broker starts with understanding the needs of the client, the risks the client is exposed to and the customer's insurance needs.

The client must be open with the broker so the latter is able to highlight risks the client may be exposed to and thus recommend appropriate insurance protection.

Offering Solutions
Insurance brokers are responsible jointly with their principal i.e. the client in ensuring that insurers are fully informed of all material facts necessary to underwrite any class of insurance.
By engaging the services of an insurance broker, the client is confident that as the professional, his broker will                                                                              
Check and in some cases issue insurance policies

Act promptly on instructions from the client and provide progress report
Negotiate with insurers on the client's behalf
Assist in the negotiation of claims / liaise with loss adjusters

Clarifying Insurance Wording
Some individuals experience difficulty either during the process of entering into an insurance contract or in administering same. Any error or omission with the insurance process at the inception of the contract manifests usually to the detriment of the insured when a loss is reported and the insurer may consequently refuse to honour the claim. The broker is able to help resolve these issues before they go wrong.

Comparing Insurance
With advancement in technology the insurance broker is able to compare a variety of insurance policies as well as competitive rates at the touch of a button and unlike the comparison websites the client gets a policy document designed solely for the client and at a premium/price that is competitive.© InsuranceInBoldPrints
The insurance brokers' roles in assisting their clients arrange the appropriate insurance protection, continually reviewing cover requirement and updating same with insurers cannot be understated.

With the appropriate insurance protection in place, the broker is also able to easily ensure that valid

insurance claims are not only paid but paid promptly too.     

In the UK, Insurance brokers are closely monitored by the regulatory body (FSA) and thus expected to conform to strict guidelines in order to continue to operate. Clients are thus assured that brokers authorised by the body are tested insurance practitioners.

The Insurance Buying Rule
Be guided by this rule -
The Simple rule: If convinced the insurance purchase is SIMPLE,
buy online.
CONTACT A BROKER when in doubt

Indemnity Policies And The duty Of The Insured After A Loss

Indemnity Policy 
An Indemnity policy is an agreement mostly in property insurance by one party (the insurer) to make good a loss sustained by the other party (the insured). The principle ensures that the person who actually suffers the loss receives no more and no less than the value of the loss.
Once an insured suffers a loss as a matter of urgency, the following actions must be taken

Notify the insurer at the earliest - The policy wording would usually stipulate that the insurer is notified of any incident which could give rise to a claim even if the insured does not intend to lodge a claim. This allows insurers or their representatives commence an investigation into the loss in good time.             © InsuranceInBoldPrints

Late notification diminishes the possibility of insurers making any recovery from any negligent party and may result in the relevant claim substantiating document being lost.

Terms of an insurance contract would also state that the insured is to provide proof of loss and produce relevant documents to back up a claim (where possible). It would be unreasonable for instance for an insurer to request evidence from an insured who has just lost everything in an inferno.

An insured is also expected to cooperate fully with an insurer or their appointed representative after a loss. Though most insurers aim to settle a claim speedily, as custodians of the insurance fund on behalf of all policyholders, they are entitled to investigate every reported loss thoroughly.

The insured is expected (where possible) to safeguard the property after a loss. Where the safeguarding of property would expose the insured or anyone else to a danger of any kind, common sense should prevail.

When the claim processing is complete, under indemnity policies insurers can opt to settle the claim in four different ways

Cash payment. This is usually the most adopted approach to settling an insurance claim. The insurance company issues a cheque for the agreed amount either in favour of the insured or his representative.

Replacement. This method is very popular with insurance companies in settling claims involving items of value like jewellery. This is also advantageous because of the speed at which such item can be replaced especially from the dealer sometimes at a discount.

Repair. Motor insurance claims would readily come to mind under this head. Insurance companies would refer claims to appointed repair shops once loss is approved for settlement. The insured in most cases only needs to pay the excess on the policy.   © InsuranceInBoldPrints

Reinstatement. This method is common in Fire Insurance claims and involves restoration of structure or building sometimes on a different site to the erstwhile condition. Obviously, disputes could arise as to whether the condition of a new structure is same as one being replaced. For this reason, this method is therefore not popular with insurers.

Tenants Contents Insurance - What Your Standard Policy Should Ideally Cover

Your insurer would usually first offer you a quote based on its standard policy wording and sometimes go on to offer optional extras or policy extensions depending on your circumstance.

You would therefore expect that the ‘Standard’ policy wording of all insurers operating in the same market would be similar; unfortunately this is not the case.

Though some similarity can be found, differences which often take an experienced practitioner to detect do exist.
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It is therefore essential to ensure that the standard Tenant Contents policy your pay for caters for the following risks. A few insurers may offer more than the limits stated below otherwise insist on the values as Standard.   

New for Old cover on your contents
With the exception of Clothing, your Contents policy should set out that losses would pay with no deduction for wear and tear.

Damage to landlord contents, fixtures & fittings (which you are legally responsible for) up to a limit of at least £2500;
Cost of alternative accommodation up to 20% of sum insured;
Accidental damage to TV, audio, video equipment & personal computers;

Theft or attempted theft or malicious damage;
Replacement of locks following theft of keys up to a limit of at least £250;
In addition to paying cost of replacing locks to external doors & windows, replacing locks to a safe within or an alarm protecting the home are also covered © InsuranceInBoldPrints

Contents in your garden, garage & outbuildings up to a limit of at least £250;
Visitors’ personal effects up to a limit of at least £250 per visitor;

Credit card Liability up to a limit of at least £250 for anyone claim as a direct result of its theft from the home & following its unauthorised use by persons not related or residing with you

Fire and Associated Perils

Loss or damage caused by:
Fire, smoke & smoke damage, lightning, explosion, earthquake, storms or flood, riot, violent disorder, civil commotion;

Subsidence, heave, landslip;
Escape of water, burst pipes, escape of oil.
Subject to policy exclusions, cover for Escape of water includes damage caused by escape from water, drainage or heating installation.
Cover also includes damage caused by escape from washing machine, dishwasher, water bed, refrigerator or deep freeze cabinet.

Impact, collision, aircraft;

Falling of trees, posts, mast;
Accidental breakage of
Mirrors, Fixed glass in or glass tops of furniture, ceramic hobs and ceramic tops of cookers and glass oven door

Legal Liability
Tenant’s Liability up to a limit of at least 10% of sum insured for damage to the building rented, accidental breakage of fixed glass or accidental damage to cables, drain, pipes or tanks providing service to or from the home;

Liability to the public up to a limit of £2,000,000;
Any amount that you or your family become legally liable to pay as compensation (including claimant’s cost and expenses) occurring in respect of accidental Death, Bodily injury or illness of any person not an employee of either you or your family.           

Liability for damage to property not belonging to or in the custody of you or your family is also covered.
Liability to domestic staff up to a limit of £10,000,000

Other risks Covered
Automatic increase of at least 10% in Sum Insured for gift /provisions in the months of November & December and immediately before / after a wedding.
Accidental Loss of metered water and oil up to a limit of at least £250;

Frozen Food
Loss or damage to food in the cold chamber of any refrigerator or deep freeze chamber due to a change in temperature or contamination by refrigerant fumes

Money up to a limit of at least £250;
Pedal cycles up to a limit of at least £250;

Contents temporarily removed from the home or whilst you or your family temporarily reside away from the home.
Contents in the home covered during normal periods of unoccupancy, for example when you are on holiday (insurance company to be informed if you are going away for 30 consecutive days or more)

Domestic staff personal effects up to a limit of at least £250 for each domestic staff

7 Things You Should Avoid When You Have Insurance

We all know how it sometimes feels like we are throwing money away after a couple of years of paying insurance premium without making a claim. It can, therefore, be devastating to learn that your policy has been invalidated through some act or omission on your part.

The following guidelines if adhered to should ensure that you avoid making the mistakes often made by many policyholders.

-Never assume that the existence of insurance is a valid reason to act reckless or indifferent to the possibility of a loss occurring. An example would be leaving a vehicle unlocked with the car stereo detached and lying on the car seat

-Never commence permanent repairs or replace damaged items whether in your home, vehicle or appliance until you have your insurer or its representative's agreement.                         © InsuranceInBoldPrints
Insurance companies not only need to be convinced that an accident/damage occurred, they must also ascertain the extent of the damage and often have to rely on the expert opinion of appointed repairers/assessors. These experts ideally prefer to inspect the damage before repairs commence

-Never duplicate cover. Always confirm what your existing policies cover before purchasing other insurances so you don't end up paying premium twice or more for the same cover because you will only ever be paid once for any loss suffered.
Most insurance contracts are subject to the insurance doctrine of contribution which in effect states that when you report a claim you are obliged to inform your insurance company about other insurance arrangements you have that might pay out. Where there are other insurers involved, these insurers agree what proportion of your claim each will pay.

-Never leave your home unoccupied consecutively for more than 30 days. This may invalidate any claim for loss/damage caused by theft as well as damage attributable to bursting, leaking or overflowing of water tanks or pipes.

-Never exaggerate a claim or submit a false claim. Not only are insurers able to detect these acts, they also share information with other operators. You could, therefore, find it difficult to obtain insurance protection or at best end up paying a much higher premium.

-Regarding vehicle insurance, never admit liability or make any offer or promise of payment as this could prejudice the insurers in any subsequent negotiations.    

-Finally, never conceal from your insurer or make a deliberate misrepresentation of a material fact. A material fact being a fact which a reasonable man in a similar position would disclose.
Detailed information about the risk insured is usually only known to you- the insured and the insurer, therefore, rely on you being open about these facts otherwise they end up getting terms and pricing wrong. The eventual discovery of these facts often leads to avoidable disputes in the event of a loss.

The foregoing notwithstanding it is advisable to equally familiarize yourself with the general exclusions as well the policy specific exclusions in your insurance policy.

Arranging Landlord Insurance Cover

As a landlord your property will definitely rank as one of your most valuable possessions and you will therefore agree that cost of repairing accidental damage or in worst case scenario, cost of rebuilding or replacing the property can be daunting financially.

Property insured under the class range from Houses, Bungalows, Maisonettes and in some cases buildings of individual flats to Purpose built flats or apartment blocks (up to an agreed sum insured).
How you insure the building will often depend on whether the property was bought with a mortgage or not. While some lenders as a way of securing their interest insist on selecting the insurance company to insure the property, it is usually wise to involve an insurance adviser or broker who is able to compare comprehensive policies and premiums from rated insurance providers.
This arrangement could end up saving on the cost of insurance and the lender should have no objections so long as the insurance policy is top notch and notes the interest of the lender. You may also avoid paying interest on your premium as lenders sometimes add the insurance premium to the loan amount. © InsuranceInBoldPrints

This class of insurance relates to Let Property Insurance and covers the Landlord against loss, destruction, damage to property including fixtures owned or for which the landlord is legally responsible including legal liability arising from the ownership of the property.

Cover is provided for the risks listed hereunder:
Fire, lightning, explosion, earthquake & smoke
Storm or floods
Riots, violent disorder, civil commotion
Theft or attempted theft
Malicious damage
Subsidence, heave, landslip
Escape of water, burst pipes
Escape of oil from installations
Impact / collision by vehicles or animals, aircraft damage or anything falling from them
Falling trees, posts, masts
Loss of rent or alternative accommodation

You can also request additional cover for Landlord contents (i.e. contents which you have provided and are used in connection with the let property) and legal expenses property disputes cover.
For an agreed premium further additional cover can be arranged for
Property owner's liability up to say £5 Million
Damage to cables, drains and underground pipes 
Contents in communal parts, accidental damage to fixed glass

The main risks excluded from the policy include, pre-existing damage, liability or injury; loss or damage whilst the home is undergoing certain renovations; loss or damage by any gradually operating cause and Theft or malicious damage by the tenant(s).

To ensure that you only pay for a landlord insurance that meets your individual need, it is always a good idea to contact and insurance specialist or insurance broker for advice and guidance

Insurance Claims - Paying A Loss Assessor To Negotiate Claims On Your Behalf

Loss assessors traditionally act on behalf of insurance companies in investigating and reviewing mostly large losses/claims. These professionals are highly trained and often specialize in certain classes of risk and insurers, therefore, know which firm of loss adjusters to refer any case which it decides to outsource.

Insurance Claims – What Do Insurance Companies Really Want?

Without the benefit of direct involvement in numerous insurance claim payments, I would probably be among those that so loudly criticize insurance companies for dodging claims payment. This is not, however, thumbs-up to the claims department of every insurance firm out there because as the saying goes 'there is no smoke without fire'.

To highlight the operation of those companies (and they are in the majority) that honour their promise to pay all genuine claims this article outlines the techniques adopted by these organizations in dealing with losses reported by policyholders.

The Legal Position

Insurance is a legal contract between the insurer and the insured and the legal position is for the party seeking to rely upon a contractual term to prove their case.
Against this backdrop, if a policyholder is seeking to claim an indemnity based upon the cover offered by the policy then

1. he or she must prove that the loss occurred                  
2. establish the loss that occurred was actually covered by the terms of the policy
3. and finally demonstrate the amount of loss in order to claim an indemnity

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To ensure that every policyholder understands what is expected of him and consequently aid Insurers in establishing admissibility as well as quantum of a claim, the claims condition is incorporated into every policy document. This sets out what the insured has to do in the event of a loss which may lead to a claim. It covers notice of loss, assistance to the insurer and proof of loss. This may also include a control of proceedings clause and a non-admission of liability clause.

Notification of Claim. Immediate notification of claim is required of the insured. Insurers insist on being notified at the earliest in order that a full investigation can commence. Delay often results in loss of evidence or witnesses being unable to recall the incident fully. Most insurers would act on notification made via a phone call.
Early notification also enables insurers to set reserves for the potential liabilities involved in the claim.

Proof of Loss. As stated earlier, the policyholder is duty bound to prove that a loss occurred. From supplying particulars of the loss to convincing the insurer with supporting documents that the loss not only occurred but that is covered by an insured peril.
This burden shifts to the insurance company if at any point it alleges that the details supplied by the policyholder are doubtful.

Assistance to the Insurer. This would usually require cooperating with investigation of the claim which would either be carried out by insurers’ staff or by a loss adjuster acting on the insurer’s behalf. In simple cases the documentary evidence supplied by the insured may be all the insurer requires. A thorough investigation becomes necessary as the nature and extent of the loss becomes more complex.

Settlement. Once liability and quantum is agreed having reviewed the substantiating documents, prompt payment of the agreed sum follows. Settlement of claim in indemnity policies can either be via cash payment, replacement, repair or replacement.        

Uncovering Fraud In Insurance

The premium paid by every policyholder is received by the insurer into a fund or pool for that type of risk and the claims of those suffering losses are paid out of this pool. 
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As custodians of the insurance fund on behalf of other policyholders, insurers have a duty to ensure that only genuine claimants get a share of the pool. The reference to genuine claimants might surprise those who believe that all reported losses are legitimate but the sad truth is that some policyholders do report bogus insurance claims.
In a case recently concluded at the high court a couple was jailed for 6 weeks for attempting to obtain a fraudulent motor insurance claim. This is just one of the numerous cases insurance companies have to sift through on a daily basis in order to ascertain admissibility of a reported claim. Sometimes this claim processing leave some policyholders frustrated and understandably so especially for those still dealing with the traumatic experience which is the subject of the claim.
Some of the fraudulent claims, unfortunately, go undetected and ultimately contribute to increased premiums borne by other policyholders.

Grievance procedure

The insurer's promise is to pay for losses you suffer having received appropriate premium for that promise. If for any reason you are dissatisfied with how your claim is handled, your policy document sets out the options for seeking redress. You can start by making a formal complaint through your insurance broker or direct to the insurance company. If your complaint is not resolved at this point, you can contact the Financial Ombudsman Service.

Click  here for tips on how to avoid crooked insurance companies

Important Considerations When Choosing An Insurance Broker

An insurance broker is an intermediary who arranges insurance or carries out other work preparatory

to the

conclusion of contracts of Insurance on behalf of another and also assists in the administration of such contracts and with processing of claim.
When deciding on which broker to entrust your insurances, the following should serve as guide only because the process of entering into a business relationship can sometimes be complex. As a general rule an insurance broker

Must be authorised to operate as an Insurance broker. In the UK these intermediaries must be authorised by the Financial Conduct Authority. It may be necessary to look up the broker’s credentials on the website of the regulator though brokers are required to display a copy of his registration certificate conspicuously in their office.         

Must be genuinely interested in understanding your business , its risks and insurance needs. This should be an ongoing process as these needs change. A good indication of the broker’s interest is where the broker carries out a thorough initial research of your situation or business and in the process gathers detailed information that helps it understand your needs.
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Must be knowledgeable not just about the classes of insurance that you seek but about the insurance market as a whole. Equally important is the broker’s knowledge of your situation. As an individual, the broker should be conversant with the nature of your work, lifestyle and interest and where the broking firm is seeking to act for your company, it is vital that the broker has at his fingertips real-time information about the industry in which you operate.

Must be willing to act on your instruction . Though as the client, you should rely on the expertise of the insurance broker, crucial decisions like the insurer to place a risk with should be down to you after reviewing information/analysis presented by the broker.
This should be the case also when it comes to claims negotiation. For instance where the quantum of the claim settlement offered by the insurance company is disputed, the final decision should always be left to you (the policyholder) after careful review of the report from the broker on the claim process.

Must always act in professional manner . In most countries the industry regulator stipulates minimum years of cognate experience and/or qualification for persons wishing to hold designated position in a firm of insurance brokers. This ensures to some extent that only reputable persons with proven ability get the nod to operate as insurance brokers.
Your broker should prepare a Service Level Agreement (SLA) which outlines the extent and nature of the service expected of the broker. In addition, whether an individual or you run a company, your appointed broker must treat as confidential any information which becomes available to him in the course of carrying out his mediation role. Such information should not be used for the brokers benefit or for the benefit of a third party. 
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Must be willing to assist in the negotiation of claims . The service level agreements mentioned above would clarify whether the broker will also handle insurance claims that predate its appointments while also making clear what would happen with reported claims in the event that the broker’s appointment is terminated.

Must disclose any potential conflict of interest. An insurance broker must act in your best interest and should disclose to you fully any circumstances that may give rise to the possibility of a conflict and ways to resolving same agreed.

Should regularly explain to you, the law as it relates to the risks you face and how the law impacts on your insurance programme.
In addition to keeping abreast with developments in your business, the broker must also track changes in law and industry trends that would impact on your business.

It is important that the broker you appoint ticks all the boxes so he can properly carry out his role and where you have any doubts, do not hesitate to ring another professional.

Important Definitions in Landlord and Contents Insurance

Accidental A sudden, unexpected event which is not due to negligence, misuse, mechanical or electrical fault or reckless behaviour
Building
A simple definition is anything on the premises that would normally be left behind if the property was sold

Making Sense Of Policy Exclusions In Non-Life Insurance

Not all risks are insurable because as  insurance evolved over the years the industry identified the following criteria a risk must possess in order to be considered insurable 

 * the loss must be accidental – damage caused by gradual  operating causes is a typically excluded loss common to all  insurance contracts 

* the loss should not be catastrophic. Insurance is not designed to cater for losses like war as these    

  could result in financial catastrophe 

* there must be a large number of exposure units 

 In other to accept a risk, Insurers assess whether the premium payable is economically feasible and also whether the chance of loss is calculable. 

  

Other Reasons for excluding certain types of losses 

A loss may be excluded because the legislation in the country of operation has already made  

provision to protect the insured following a financial loss. An example would be the exclusion of loss or destruction attributable to radioactive contamination and also the exclusion relating to war and kindred risks. 

  

A loss may also be excluded where coverage is provided by other insurance contracts. Tenants contents insurance, for instance, excludes property more specifically insured by any other insurance 

The presence of an extraordinary hazard is also another factor. Exclusion of Loss or damage attributable to coastal or river erosion commonly found in most Contents and Buildings insurance will fall under this category. 

Moral hazard which refers to the character, habits and actions of the insured that influence the possibility and extent of a loss is another vital criteria. 

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Carelessness and dishonesty are two of the top characteristics insurance companies avoid. However, on the subject of carelessness, insurers are required to be explicit as the courts have held that one of the risks insured against is a policyholder’s own carelessness and have thus interpreted ‘reasonable precautions’ to be a basis for avoiding liability where the policyholder is reckless as opposed to just being negligent. 

  

Insurers are therefore not allowed to incorporate into policy documents atrocious terms which make it difficult for claimants to successfully receive full payment. A good example would be the condition to take all reasonable precautions to prevent the loss. This appears absurd when in fact the policyholder believes the premium paid is to ensure he gets indemnity if he makes such eventuality. 

The courts are there to curb the excesses of any insurance company that interpret such terms to include unquestionable negligent acts. 

 Insurance generally excludes acts that are against public policy hence the exclusion of loss or damage caused by items being confiscated or legally taken by customs officers or other officials 

  

The Insurance Company as the victim 

There is the popular belief that Insurance is a necessary evil and that insurance companies make huge profits from taking advantage of the hapless insuring public. In reality, these firms do not make profits that compare to firms in the banking sector for instance largely because the bulk of premium income goes back to members of the pool i.e. policyholders that suffer loss. 

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Information that does not make headlines often enough is the fact that insurance firms are frequently targeted by fraudsters who make dubious insurance claims. These criminals take advantage of the fact that the insurance company only has as much information about a risk as an insured decides to provide. 

A popular folklore about a hunter and a sought after bird quotes the creature as saying “as the hunter has learned to shoot without missing, I have also learnt to fly without perching”. This statement best describes the cat and mouse game between insurers and fraudsters continually seeking to profit from insurance. 

  

One approach adopted by insurers to keep up with these criminals is the inclusion of policy/risk specific exclusions / warranties and conditions into an insurance contract. 

Insurers also continually update information about a risk insured on its files by incorporating into contracts, the duty of disclosure which requires the insured to disclose all material facts i.e. a fact about a risk proposed for insurance which would influence a prudent insurer in deciding to accept the risk and on what terms.