False sense of security

4/19/2007 12:09:45 PM

After the annual rerate when we see that our premiums have increased?

Are we always confident that our insurance contract is based on correct information and that should we find ourselves in the unfortunate position of having to claim, we would have cover?

Insurers base their premium on the risk they believe the client poses. Questions such as do you live in a security complex or estate, and the security you have on your house are asked or what car you drive and what you use it for. We answer all these questions when we apply for insurance and the premium that we are charged is based on the accurateness of the information given, but do we consider the impact when these circumstances change?

An example of this would be if you have recently moved house. You may have moved from a security estate to a normal residential suburb where you have less security. A couple of months after your move, you have a burglary and report this to your insurer. They inform you that there may now be complications with regard to the settlement of your claim, as the move from a security estate to a normal residential suburb has considerably increased the risk they carry in terms of burglary and this has had a direct effect on your premium. Often, because the insurer was not informed of the risk change they apply a prejudice clause and this may result in a decrease in the amount paid out for the claim or even total repudiation of your claim.

It is thus very important to consider any change in your life and how this may influence your insurance cover.

Happy and informed insuring

The Editor