Read insurance policies with a toothcomb to avoid pitfalls

For the past five months, Wilson Njage has been demanding compensation from a top insurance company in vain. This follows a road accident that involved him and the insurance firm’s client.

“I was driving from work on May 8 when my car was hit from behind by a silver Toyota sedan,” he says.

“The driver appeared drunk. He was speeding when his brakes failed.”

Since then, Mr Njage has been visiting the insurance company seeking compensation to fix his car.

NOT WILLING TO PAY

“The police abstract clearly put the offender at fault. However, the insurance firm has been taking me in rounds,” he says.

“Last week on Thursday when I visited them, I was told that they would only pay up if and when the offender reported to them and made a claim.”

The insurance company, he has been told, is under no contractual agreement with him.

Joanna Atieno is also distressed over insurance.

“I signed a medical policy with an insurance agent who promised that my package would cover me and my family. However, when I took my daughter for a corrective limb surgery two months ago, I was told that she wasn’t listed as a beneficiary,” she says. 

“I was also told that my policy didn’t cover surgical expenses and only catered for admissions, yet I have been coughing up Sh10,000 per month for the scheme.”

Currently, Ms Atieno, 33, is staring at an unpaid hospital bill of Sh330,000.

READ THE FINE PRINT

These two cases illustrate the trouble insurance customers go through after being misled into signing policies they do not fully comprehend.

Such customers do not fully comprehend what their policies cover, or have no clue on how to make a claim. Yet, the essence of an insurance policy cannot be emphasized enough.

Ms Waceke Nduati Omanga, a personal finance expert, says while some people tend to opt for a savings account to cater for emergencies, insurance policies are a far better option.

“You may put Sh300,000 aside for a medical emergency, but when the emergency occurs, you quickly realize that you need Sh1 million,” she says adding that this is when it dawns on you that what you needed was insurance not a bank account with a limited amount of money.

BE WARY OF SOME DEALS

Nonetheless, as Ms Atieno attests, consumers should be wary of insurance deals that hide more that they reveal. 

For instance, in the case of the National Hospital Insurance Fund (NHIF), there are agents who take cash, register members and remit their monthly contributions on their behalf to the State insurer.

If you are under such an arrangement, you need to be fully aware of the consequences should your agent fail to deliver your monthly remittances in good time.

“If your NHIF agent defaults, you’ll be forced to pay the Sh2,500 fine simply because you weren’t clear on who would shoulder this burden when you signed with your agent,” says Mr Peterson Obwocha, a Nairobi-based financial and insurance expert.

Alarmingly, notes Mr Obwocha, many consumers seeking for wholesome coverage fail to realise that some insurance policies require them to acquire other secondary insurance policies to be fully covered.

HOW TO SHOP FOR INSURANCE

“For example, in vehicle insurance, there will be a comprehensive insurance cover that will only cover damages or losses to the car and claims made by third parties but not you. In such cases, you will be required to acquire another insurance policy to cover yourself,” he says.

To begin with, once you have settled on the kind of policy you want to take, always make sure you get quotes from different insurance companies.

Currently, according to the Insurance Regulatory Authority (IRA), 196 insurance brokers and 28 insurers have been licensed this year.

There are online portals where you can get information on the cost of insurance products offered by various companies.

These platforms compare prices of covers provided by various insurers. These portals include InsureAfrika and Jabavu. 

Nonetheless, you may still want to check out with your potential insurance firms to verify the latest rates in the market.

You should also look out for insurance products in the market that you can easily afford.

Mr Obwocha says your decision to invest in an insurance policy should be informed by your current and projected income, your future financial plans and possible obligations, and your medical state and age.

“You should also evaluate the benefits you’re likely to acquire from an insurance policy in contrast to the amount of money you’ll cough up to cover its costs. These benefits must be extended to all your immediate dependants who include your nuclear family,” he says.

DO NOT OVERBUY

Further, according to Forbes, you should always take care not to overbuy.

“Though you want to purchase adequate insurance coverage, you should take caution not to overbuy. If your premiums are too high to manage because of extras that have somehow found their way into your policy, you will be much more apt to allow it to lapse.”

In the same vein, Mr Obwocha says, you should also be clear if the product you are signing will have a surrender value or not in case you decided to terminate the insurance contract after a period of time.

This means you will need to go through the major sections of the contract with a toothcomb. These include the policy exclusions, conditions, definitions and benefits.

Given that you’re likely to be inundated by numerous offers from different insurance companies, your first instinct should be to look out for the firm that has the capacity to meet its financial obligations and settle valid claims adequately.

CHECK OUT FOR PROVEN TRACK RECORD

“Insurance companies will have the habit of being easy to list with but very difficult to settle claims with.  Check out for a proven track record of customer satisfaction,” Mr Obwocha says.

“A firm that takes customers seeking valid claims round and round to avoid responsibility is not worthy of your money.”

IRA says your antenna should get rattled if the insurance agent you are engaging appears too impatient.

“Steer clear if a particular group or agent has contacted you repeatedly and impatiently, and is offering you a limited time offer,” cautions IRA.

“Always conduct your research adequately, never sign on any blank paper or give cash to an agent, and individually always fill in the proposal form.”

READ BEFORE YOU SIGN IT

Mr Obwocha says you should never assume that your insurance policy is similar to the one owned by your colleague or friend.

In fact, he observes, you should always read and fully understand your policy before you sign on the dotted line.

This will avert any misunderstandings that may arise when you make a claim.

If you are looking to make a claim against an insurer, you should do so within the first three years of the act against which you’re laying claim.

However, before launching your complaint, you should first of all seek redress from your insurer.

“In many cases, the dispute may arise due to lack of communication between the parties or misinterpretation of clauses in the policy terms and conditions,” says IRA in a public report.

If you make a complaint against your insurer to the IRA through a phone call or email, you should ensure that your complaint has been confirmed through writing to the body for proper and appropriate execution.