Insured But Not Really

You speak so well about the importance of insurance and the benefits it offers, but are you aware that many insurance companies act like scammers who never honor their pledges? One frustrated customer shared their experience: "We have been pushing for claims for more than a year, and our payment is never coming through."

This story is not unique. Many others have aired similar frustrations, wondering why they paid substantial amounts for insurance only to be told they are not entitled to certain benefits. Unfortunately, sometimes the failure is on the side of the insured, who may have faulted in adhering to certain terms and conditions, often because they either did not read or failed to understand them. In this article, we discuss the reasons why insurance claims are often not honored and what can be done to make insurance beneficial for all parties.

Understand Insurance Contracts

Insurance coverage involves signing a contract between the insured and the insurance company. Like any other contract, there are specific terms and conditions that both parties must adhere to for the agreement to be valid and effective. These conditions are different from one company to another and from one insurance type to another and one policy to another. Therefore, it is important that when you get any kind of insurance or invest with insurance companies, understand the agreements that you are signing for. The biggest mistake many people make is to assume that simply because they have purchased insurance, then they are covered.

But simply having a policy and not adhering to what is written in the agreement, often written in small print, may lead to no receipt of insurance benefits. Insurance companies receive premiums to cover calculated risks and so, they too are careful to not take up risks more than they can manage.

Just imagine how they could afford to pay for things that are self-induced. Imagine if people with car insurance deliberately bashed other cars, knowing that insurance will pay or those with house insurance set their house on fire simply because insurance companies will pay. Understand the contract.

Disqualification factors

Every insurance policy has guiding rules that, if not followed, will lead to the insured not receiving the benefits of having insurance. These may include requirements for timely notification of claims, necessary documentation, or other obligations.

For instance, in my vehicle insurance policy, it is clearly stated that "notification must be done within 14 days for accident damage and 48 hours for theft from the time of the event." My failure to notify as required would lead me to not reap the benefits of the insurance. Furthermore, it states that "this insurance ceases on the sale or change of ownership of the stated vehicle." Clearly, if I sell the car, I must understand that the insurance cover is over, as the new owner cannot use the old insurance policy.

Other disqualification factors under vehicle insurance include driving under the influence of alcohol, allowing an unlicensed driver to operate the vehicle, and failure to settle all premiums due. In the case of health insurance, non-disclosure of pre-existing conditions can also disqualify individuals from receiving certain benefits. Therefore, it important to ensure that, as a policy holder, you clearly understand the circumstances under which claims will be successful and to adhere to the specified requirements so as to avoid feeling duped.

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Understand Insurance Exclusions

When it comes to insurance policies, it's important to recognize that, like any other contract, they contain specific exclusions that are not covered. Exclusions refer to any loss or damage that is not covered by your insurance policy, including circumstances or events that fall outside the coverage.

Under vehicle insurance, damage caused by war, civil disturbance, riots, or terrorist activities is often not covered. So if you drive to an area where people are rioting, the damage caused may not be covered by insurance. Further damage caused by natural disasters such as floods, intentional damages such as participating in car racing or even wear and tear of a vehicle, would be excluded.

Vehicle insurance is usually covered for a particular country and so, if you drive out of the country’s borders and face damage to your vehicle, know that insurance will not cover that cost. If you purchase third-party insurance, then know that only third parties and not you, are covered. Similarly, with medical insurance covering hospital bills, certain treatments such as costly surgeries may be excluded from the benefits for the policyholder. In the same way, travel insurance is for specified jurisdictions and so, you can’t change your destination and still expect to be covered. Thus, it is extremely important to fully understand and not assume the coverage of your insurance to avoid having claims denied. If in doubt, always ask the insurance companies for clear explanations on what is covered and what is not. It is best to avoid waiting until a claim is refused to realize that some things were not covered by the insurance policy.

Role of insurance companies

Insurance firms should be concerned when they have many unhappy clients complaining about denied claims.

While increased denied claims may boost profits in the short term, the long-term impact is a decline in business and reduced insurance penetration.

Despite the importance of insurance and benefits of insurance, the insurance penetration rate still remains low. Some potential reasons include frustrated customers who often discourage others from using insurance, hence losing out on potential clients. This in part, is as a result of insurance companies focusing mostly on marketing their products and looking for opportunities to disqualify claims so as to enhance profits.

Insurance is important, no doubt but the value is seen in the benefits that people get. It is important that insured people do their part of not only paying premium but understand what they are paying for. Insurance companies also have a responsibility to provide as much information as possible so that in times of dispute, we have less frustrated customers.