Insurance

Buying protection against the hazards of life and how to read and understand the Insurance Policy carefully.

Insurance is a legal contract made between you and an insurance company. The contract document is popularly known as an Insurance Policy. As soon as you receive it, you should read every line carefully. If it contains anything you object to or omits anything you want to have included, bring it to the company’s attention before signing it.

Most common clauses in insurance policies:

• “Preamble” – this is the generalized introduction to the policy stating that an agreement has been reached between the company (the insurer) and you, (the insured).
• “What is insured” – these will be clauses describing what exactly is insured and an express description of the eventualities insured against.
• “Exceptions” – The policy document will have clauses relieving the insurance company from liability – the type of exception clauses vary according to the class of insurance. For example, in a fire insurance policy, the company can state that it will cover all losses caused by fire except for fires that are caused by lightning.
• “Conditions” – these are the most important terms of the policy. If you do not comply with them, the insurance company can legally refuse to pay out the insurance. Conditions vary according to the type of insurance. For example, a motor insurance policy may insist on proper maintenance of the car. Fire insurance may insist on fire extinguishers being installed on the premises and have them serviced regularly.

Failure to do proper maintenance of the car may entitle the insurer to refuse to pay. The burden of proving a breach of a condition lies with the insurance company. So in the example above, the insurance company has to prove that you did not do proper maintenance of the car before they can refuse to pay out the insurance.

• “Schedule”– usually includes the basic details that apply only to your policy: the policy number, your name and address, and other personal information, what is insured for how much, when the premiums are payable, the date the policy begins, and so forth.‎

Once an insurance policy is made, the terms cannot be changed without the consent of the company and yourself. The insurance company does not have the right to unilaterally vary the contract without notifying you.

• “Assignment of the insurance policy”– insurance policies may have clauses providing that the insurance can be passed on to someone else. The purpose of assignment is so that, upon your death, the policy passes onto someone else you have chosen. This is especially important in fire insurance, if you insure your house, there is a high possibility that you will pass on and leave the house. It is therefore important that the house remains protected by having the obligations under the insurance contract assigned to someone else, perhaps an heir to your estate.

Usually, the person who inherits the insured property inherits the insurance contract. For example, if your house is inherited by your daughter/son they also inherit the household-fire insurance on it, unless they elect to drop insurance altogether. In Life insurance, the assignment occurs automatically, when you die, the benefit on the policy passes on to your next of kin or dependants.

• “Lapsing/Termination” – policies that are renewed periodically will lapse if they are not renewed. If the renewal is not done, you can not claim anything from that company. Some contracts state that the policy will lapse if the premium is not paid within a certain number of days after the agreed date of payment. Normally companies send reminders. However, even if they do not, you still have to make sure you have paid your premium otherwise you lose out on your previous payments.

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The author of this snippet is Simon Flemming Mutandi, a lawyer who writes in his personal capacity. The purpose of these pieces is to share insights into the law. The language and content is simplified to give the reader a digest of complex legal issues. For more information contact 0783475020 or email simonflemming1@gmail.com.