Ombudsman reveals pitfalls that trip up insurance customers
Many insurance problems could be avoided if policy-holders better understood how their cover worked, the Insurance and Financial Services Ombudsman (IFSO) says.
Karen Stevens' office is contacted by 3000 people a year who have had problems with their insurance or financial service providers.
Insurance complaints made up the bulk of the IFSO scheme's work.
Stevens said Money Week was a good opportunity to remind consumers of what they needed to know to get the best out of their policies.
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Read your documents
Stevens said it was important that policy-holders read the documents their insurers gave them so they understood the terms and conditions of their insurance.
"Even if you're purchasing insurance online, or as part of a travel package, always get hold of the policy and work out what will and won't be covered," she said.
Those who bought their insurance through an insurance broker should ask more questions if they lacked information, she said.
Recent publicity about trauma policies that did not pay out when people expected them to could have been avoided if customers had understood the policies more fully, she said.
Her office had dealt with a number of complaints about claims for methamphetamine contamination – but the policies allowed the insurer not to pay them because the damage was deemed to have happened gradually through tenants smoking over time, rather than a one-off episode of drug manufacturing.
Understand your own obligations
Most insurers expect you to act in a certain way if you want your policy to pay out.
That means not leaving the house or car unlocked, for example, or not leaving valuable belongings on the beach when you go in the sea. Stevens said people who put valuable goods in their checked-in luggage on a plane might also find their insurer did not pay. You'll also be expected to report stolen items and make your payments on time.
Stevens said customers needed to understand that they had to answer all the insurers' questions honestly and completely, even if they did not think the information was relevant. That applies both at the time of application for a policy and when trying to claim. "Otherwise you might find out when you really need that insurance it's not there."
She said it was still common to see problems with pre-existing conditions and travel insurance.
"You might not have had any condition diagnosed before you go but if you have a really heavy cold and you go to the doctor and get antibiotics and then while you're away it turns into pneumonia – you might say it's only a cold and I didn't know I was going to be hospitalised – but if you've had anything that leads to it or you've had symptoms, in all probability you're not going to be covered while you are away. These are real pitfalls for people."
She said the same happened with health insurance – sometimes people had claims for operations or treatment declined because they already had symptoms before they took out the policy.
Know how your excess works
Stevens said people were sometimes caught out by insurers' practice of charging a separate excess for each insurance event.
If there was damage to several rooms in a rented house, the insurer might say they were all different events and charge an excess for each of them. "People say it wasn't my fault, why should I have to pay? The answer is often 'because you do'. It's part of the self-insurance people agree to when they take out a policy."
Know what you need to do to claim
You may be required to keep receipts and valuations and photograph and document your damage.