THE travel chaos around Europe this week has highlighted how many people did not heed recommendations to ‘check the small print on your travel insurance.’
You might, for instance, have thought you had ‘Travel Disruption Cover’ to protect you from delays, or for having to stay abroad longer than you’d planned - like those poor people in Tenerife – only to find that, in many policies, Travel Disruption Cover was the optional extra that you didn’t take.
This doesn’t just apply to travel insurance in the coronavirus crisis, though. You really have to understand your small print, no matter what kind of insurance you are buying.
In the pre-Corona days (remember them?) understanding the small print in insurance policies was always an issue, and it still is. Take critical illness insurance, for example.
We know that every critical illness policy is different, and that while all cover the core conditions of cancer, heart attack and stroke, most cover many more diseases and conditions, and you have to know what you’re covered for, down there in the small print.
The next aspect of critical illness is getting the application right, and this is where good advice and the help of a qualified adviser come in handy.
The Association of British Insurers (ABI) use the term ‘material fact’ to describe information that you must reveal to your insurer, to enable them to properly work out how much you should pay for your cover.
The ABI’s definition of ‘material fact’ is: “An important fact about you or your circumstances that would influence an insurer’s decision on whether to issue a policy, and on what terms.”
Now, it’s not that we are all swindlers trying to get our insurance cheaper than we should, by deliberately falsifying our applications, or hiding important information.
Most of the time, we’re talking about what is known as ‘inadvertent non-disclosure’, where we didn’t mention something, simply because we honestly didn’t know it.
The classic example of this, when applying for critical illness insurance, is not knowing what happened in your family history. Maybe our parents were a bit touchy about revealing their own health problems, and it’s often the case that a person was unaware that, say, their father had had a mild heart attack, because he had preferred not to talk about it.
However, if that person did need to make a claim, later on, those medical records might then come to light. Through no fault of their own, the person has technically made a flawed application when taking out their cover. As the ABI put it: “Non-disclosure or misrepresentation of such facts can result in your policy being cancelled, or your claim being declined.”
Then there’s the temptation to make ourselves appear a little healthier than we actually are. You must, says the ABI, “take reasonable care to avoid misrepresenting your circumstances when answering questions. This means ensuring you do not give information to your insurer that you know is untrue or misleading.”
In order to help us with this, they brought in The Consumer Insurance Act in April 2013. This replaced old laws that had not been updated since 1906, so as you can see, a ‘spring clean’ was well overdue.
The Act applies not just to critical illness insurance, it applies to all types of personal insurance: home, car, pet, travel, life, income protection, health, and also pension annuities.
The new order features application forms that are much clearer and less ambiguous than the old ones, reducing the possibility of inadvertent non-disclosure by confused applicants, and thus providing additional layers of protection for the honest customer.
These days, claims are only declined where dubious applicants have been ‘careless’, ‘deliberate’ or ‘reckless’, in other words where false information is used to cover up a health condition, or otherwise get cheaper cover.
Is it possible that you have a health condition you’re unaware of? Just listen to this: the insurer LV= tells us that more than 14 million adults in the UK have high blood pressure, but nearly 5 million don’t know it, because they haven’t been diagnosed.
That’s why the ABI recommend having your adviser help you, when looking at any form of cover.
Life’s a journey, and you have to know what’s in your insurance, before you travel!
:: Michael Kennedy and Shaun Doherty are independent financial advisers and pensions specialists, and can be contacted on 028 71886005. Further information on Facebook at “Kennedy Independent Financial Advice” or via www.mkennedyfinancial.com
