Understanding your insurance policy

By Doreen Kambanganji

One of the functions of the Pensions and Insurance Authority (PIA) is to protect the interest of insurance policyholders, which also involves dealing with complaints. The complaints range from under-payment, unauthorised deductions to non-payment and delayed payments of claims.

The PIA assists in resolving most of these complaints and those who have sought our assistance can attest to this fact.


Unfortunately, sometimes we are unable to assist because we discover that the policyholder did not fulfil certain conditions as they did not understand the policy and this leads to frustrations. If you do not read your policy, you may not understand certain information such as the cooling off period, maturity date of a policy and the consequences of terminating a policy before it matures. Other important information that you may miss includes the extent of the policy coverage, exclusions and the claims process.

For example, terminating a policy before it matures can result in underpayment or non-payment. Terminating an insurance contract has consequences and these are usually included in the policy contract. In this case, the policyholder may be expecting to be paid back all the premiums and interest earned but this may not be the case. The policyholder will therefore, feel cheated. It is important to understand that while insurance is a good investment, it also requires commitment.


Reading the policy can help manage your expectations as you will know for instance that you can only get the full benefits of a policy when it matures.


In our consumer education programmes, we do not only raise awareness on the benefits of insurance, but also emphasise the need to read an insurance policy including the terms and conditions. An insurance policy is a legal contract between the insurance company and the person or business being insured.

Understanding your policy before going ahead with the purchase can help you avoid disagreements with your insurance company in future.


Reading and understanding your policy will help you verify that the policy does actually meet your needs. It will also help you to understand your obligations and the insurance company responsibilities when a loss occurs.

Below are some of the basic terms that that you should look out for in your policy contract:


Declaration
This is usually the first part of an insurance policy. It identifies who is insured, what risks or properties are covered, the policy limits, and the policy period. In the case of motor insurance, this section will include the description of the vehicle covered (make/model, VIN number), the name of the person covered, the premium amount and the sum insured.


Definitions
Most policies have a definitions section which defines specific terms used in the policy. Do not take it for granted that all words mean the same. For instance, the term dependent may be linked to age, employment status etc


Exclusions
Exclusions mean the conditions or services excluded (taken away) from the policy cover.  An example of an excluded loss under a motor policy is damage due to wear and tear. Under a medical policy, you may find exclusions on selective or planned surgery, say, within the first three months following commencement of the policy. Other exclusions could include injuries caused by alcohol or drugs and other pre-existing conditions at the time of taking out a policy.


Conditions
Terms and conditions are provisions found in the policy that qualify or place limitations on the insurer’s promise to pay or perform. If the policy conditions are not met, the insurance company can deny the claim. Common conditions in a policy include the requirement to file a proof of loss with the company, to protect the property after a loss, and to cooperate during the insurance company’s investigation. Some people choose not to cooperate and the insurance company may delay or even fail to honour the claim, and when this happens, it leads to frustrations and even anger. This can be avoided if you read and understand the policy as you would be fully aware about the terms and conditions tied to the policy.

However, the PIA understands that terms and condition are usually difficult to read and comprehend. It is for this reason that it has now become mandatory for all insurance companies offering motor insurance, household or contents insurance, homeowners insurance, funeral and life insurance policies to give Key Fact Statements to customers.

Key Fact Statements are part of disclosure requirements that should assist in clarifying terms and conditions of insurance policies.


To ensure that you are on the safe side, always make sure you get a copy of your insurance policy and Key Fact Statement from your agent, broker or directly from the insurance company. If you find the policy too complicated to understand, do not hesitate to ask your insurer or broker to explain the key features of the policy.

For comments or questions, send us an email at pia@102.23.123.62 or follow us on our Facebook page, Pensions and Insurance Authority.

You can also call us on 211-251 401/5 or 0977-335809 or 0965-255136.

For complaints, kindly use the following details:

Pensions-related complaints: Mobile: 0950-136663, Email: pensions@102.23.123.62

Insurance-related complaints: Mobile: 0950-136662, Email: complaints.insurance@102.23.123.62

The author is the Communications Manager at the Pensions and Insurance Authority.