Insurance policies differ greatly and trying to understand all the terms and clauses involved can be confusing. From car insurance and home insurance to life and health insurance, here are some tips on how to get on top of your policy:
1. How Does Insurance Work and Why is it Confusing?
Insurance works by asking you to pay a regular payment (called a premium) every week, month, quarter or year in exchange for a certain level of cover. If something unfortunate happens or if you suddenly need assistance, your insurance may cover some or all of the costs involved.
Insurance means a small cost upfront to save you from having to face huge financial burdens if something in life goes wrong.
The reasons why insurance is confusing are listed below:
a) There are many different insurance companies that offer cover for different things;
b) Your insurance policy can be tailored specifically to you, meaning the rules can change all the time; and
c) Insurance providers are very detailed and strict about exactly what circumstances and events they will pay for and which events they won’t.
2. Inclusions and Exclusions
‘Inclusions’ are the things included in your cover. They usually have a yearly dollar limit that you can claim.
If you have health insurance, for instance, your inclusions may cover expenses related to general dental or physiotherapy. So if you need to go to the dentist or see the physio, your insurance would pay for some or all of the costs involved.
‘Exclusions’ are things that are not included in your cover. Policies will be very explicit about what the provider won’t cover if something happens. For example, if you have car insurance, your policy might include cover you if you cause an accident while driving, but not if your car has been substantially modified or if you were under the influence of alcohol or drugs at the time.
In regards to life insurance, a common exclusion is suicide. So if you were to die accidentally, a large amount of money would be paid to your next of kin. However, if you committed suicide, your next of kin would receive no money from the insurance policy.
3. Waiting Periods
For each inclusion in your policy, a waiting period will usually apply. This could be 2 months or 1 year. This means that you cannot make a claim against this particular cover throughout the waiting period. Essentially, the cover only becomes effective once the waiting period is up.
4. Pre-Existing Conditions
Pre-existing conditions are also common exclusions in your policy. This means if the problem existed before you signed up, the insurance provider won’t cover it. A common example of this is having an ailment before you take up health insurance. In relation to car insurance, a pre-existing condition would mean that you are not allowed to make a claim on any damage that occurred before you took out the policy.
5. Understanding Your Specific Policy
Many insurance providers understand that trying to make sense of your insurance policy is difficult. For this reason, they will often produce many other publications, such as booklets, their website and other PDFs to help you understand what your policy does and doesn’t cover. In most cases, you will be able to find a table that lists down what is included in your policy.
If you are unsure about a particular term or clause, the best thing for you to do is to contact your provider and gain direct information from them in regards to your queries. However, instead of simply asking, “What does this clause mean?”, explain your specific situation to the representative. They will then be able to advise if the insurance policy is right for you and if your circumstances are covered.