Making sense of ‘insurance jargon’ isn’t always easy, but the consequences of not fully understanding your policy can be the difference between your policy delivering and your claim getting paid or your policy becoming invalidated.
At Partners&, we love broking, but not how it is done today! We believe in transparency. In particular, clarity around what exactly individuals or businesses are agreeing to when purchasing their insurance policy or programme.
Three key reasons why claims aren’t paid quickly:
1 | Lack of compliance with warranties, conditions and endorsements
2 | Not advising broker/ insurer of changes
3 | Under insurance
With so many claims not getting paid as a result of not understanding warranties, conditions and endorsements, we decided it was time to unpack what these terms actually mean.
Understanding your insurance policy – what you need to look out for.
Essentially, your insurance policy is a contract between you and the insurer. If you do not adhere to the warranties and conditions, cover may be invalidated, and claims payments could be reduced or denied altogether. That’s why we take the time to go through your policy with you and explain the details.
Your contract is generally evidenced in two parts:
- The policy wording – the insurer’s standard terms and conditions, which apply to all who buy a particular policy
- The policy schedule – the part of the contract that outlines your individual details regarding the cover required and any additional terms and conditions which the insurer has seen fit to apply specifically to your policy, over and above the standard policy wording.
You may also be provided with: A statement of fact – the declarations that you have made and/or assumptions the insurer has made about you and your business which underpin your policy. It is important to review these statements, bringing any details that are not correct to our attention so we can inform the insurer.
Variations to standard wordings, such as the specific terms and conditions you will find in your policy schedule generally take the form of warranties, conditions and / or endorsements.
What are warranties on my insurance policy?
Warranties are the policy terms that you need to adhere to exactly in order for the policy to be in force. If you cannot adhere to these terms, the warranty is breached. In this case, there is an effective suspension of all cover until you can adhere to the terms, assuming it is a situation that can change.
For instance, your policy may include a security alarm warranty. If your alarm is faulty and out of action for a period, the cover will be suspended until it has been repaired and you can comply again. If a loss occurs during the period of suspension – even if it is unrelated to the warranty – there is a danger that no cover at all will be in place.
For certain warranties that relate specifically to the management or control of a particular risk (such as the security alarm warranty), cover may be provided for other risks, but the onus is on you to prove that the breach of warranty was unrelated to the loss.
Whilst this might be easy to prove (e.g. a loss arising from a burst pipe while the security alarm was awaiting repair), the best position – where it is in your control – is to understand and ensure you adhere to the warranties at all times. Where you cannot, for whatever reason, you should speak to us so we can keep the underwriters engaged.
How do conditions and endorsements impact my cover?
Conditions relate to specific aspects of cover, rather than the whole policy itself. Like warranties, you need to adhere to conditions in order for your cover to perform as you would like.
Endorsements are variations to the standard wording and are added to the policy schedule to become part of the overall terms and conditions of your policy. Sometimes endorsements might be in place to restrict cover in certain circumstances (e.g. exclusion of flood at a high-risk location or increased excesses for certain risks). Other times, endorsements may offer more cover, often being the way insurers write extensions that add value to the policy, such as seasonal increases to stock levels.
What do subjectivities on your policy mean?
Subjectivities are another form of condition which make clear that terms are offered on the understanding that you will take certain steps. Sometimes action is required before the contract is entered into; other times the policy may be allowed to start, but you must take the required steps within a defined period of time. If these subjectivities cannot be met, it has the effect of a breach of condition. Depending on the nature of the subjectivity, it may negate cover for certain risks or the policy as a whole.
Your insurance programme is likely to include some or all of the above. You should read both the policy wording and policy schedule together to ensure that you fully understand the cover, and how it applies to you.
If you are unsure about any aspect of your cover or you believe you may not be able to comply with any of the policy terms and conditions, you should contact Partners& immediately so that we can work it out together.
Telephone +44 (0) 3300 940177 | Email contact@partnersand.com
To understand more about other key reasons insurance claims don’t pay out and how to avoid this check out our recent blog – Why insurance claims don’t get paid: 5 most frequent reasons.
