10 most commonly misunderstood insurance terms made simple
We’ve all been there. You’re on the phone to your insurance company and they’re saying things that you don’t understand. Disclosure? Exclusions? Market Value? What do these mean and why do you need to know?
To help you get to grips with insurance-speak, we’ve researched the top 10 most commonly misunderstood terms, put them into plain English and thrown in some handy tips and tricks so next time you contact your insurer not only will you be fluent in their language, you’ll sound like you totally know your stuff.
This is the contract between you and your insurer. This hefty little number contains all the ins and outs (terms and conditions) of what you’re insured for and – perhaps even more importantly – what you’re not (these are known as ‘Exclusions’ – read on for an explanation of what that means).Tip: You can ask your insurer for a copy of your policy at anytime. Don’t be afraid to ask your insurer to explain anything you don’t understand. Ask for real-life examples of terms you’re really struggling with.
In the world of insurance, this means sharing all relevant information and being open and honest with your insurer when applying for cover. If you haven’t been truthful and later down the line you need to make a claim, your insurer may not be obliged to pay out some or all of the costs needed to fix what’s gone wrong.Tip: Pay careful attention to the questions you are asked when buying your policy and if you don’t fully understand something, ask for clarification.
These are items or situations that aren’t covered under your policy. For example, if you’ve made modifications to your car that you haven’t told your insurer about and these are damaged or stolen, the cost to repair or replace them may not be covered . Other examples are, you might not be covered if you decide to start using your car as an uber taxi or pizza delivery service, tell your insurer and they’ll make sure you are on the right policy that will cover you. If you decide to go on a four month holiday and rent your house on air BnB while you’re away, tell your insurer and they’ll let you know if any different terms apply.Tip: Make sure your policy is up to date with any changes to your situation. If there is an exclusion on your policy that you’re worried about, discuss it with your insurer – they may be able to help.
What you pay for your insurance cover.Tip: Special discounts/rates are sometimes available to customers who take out more than one policy with the same insurer. Ask your insurer if there are any special offers available to you.
‘Lodging’ or ‘making’ a claim happens when you approach your insurer to cover the cost of a loss and it is covered under your policy.
This is the amount that your asset (e.g. house, car or contents) is worth. Your insurer will usually give you a suggested sum insured, but you can negotiate an amount with your insurer that you’re both happy with.Tip: Make sure you include the value of all accessories when you buy a policy. For example, if your car has flash after-market mag wheels, be sure to include the value of these in your car’s sum insured.
This is the portion of any loss that you agreed to pay when you took out the policy. The insurer makes up the rest of the cost to put right whatever has gone wrong.Tip: Sometimes opting to pay a higher excess can mean cheaper premiums. Talk to your insurer about the best option for you.
This is the point in your policy when you can choose to continue or end your cover. Use this opportunity to review the cover you’ve got and make sure the sums insured are up to date and adequate/high enough to allow you to replace the property if the worst should happen.Tip: Remember to update your insurer on any life changes that have happened since you took out the policy. For example, if you’ve fitted a burglar alarm to your home or refurbished your kitchen, let your insurer know so they can bring your policy up to date.
A policy that offers market value cover means that in the event of a claim you will receive the used/second-hand value of the item – ie its value immediately before the loss or damage occurred. This will take into account wear and tear and use. For example, if your six-year-old TV is damaged by accident, your insurer will work out the current value of the TV in its used condition and pay you the amount it would cost to buy one in a similar condition. This level of cover is offered under AMI’s Premier Contents insurance