Many business owners have recently felt let down by insurance providers for not offering any redress for loss of earnings due to enforced closures, as a result of the coronavirus crisis.
Insurers have responded that payouts will be made where the wording of individual business interruption policies specifically covered for a global pandemic — and that will be a rarity.
Whilst disputes are likely to go on for some time as to whether individual claims are valid, the situation is a reminder that the detail of policy documents is crucial.
It was once famously said that nothing in our world is certain except death and taxes. The obligation, at some point, to buy insurance is almost as certain.
You are forced to buy insurance if you want to legally drive. In almost every case, a mortgage company will require you to have insurance in order to lend you the money to buy a house. And whilst travel insurance is not obligatory, when you’re going abroad, choosing not to buy it is perilous.
There are other types of insurance that may be necessary or very wise to consider throughout life, but these three are almost unavoidable:
1. Car insurance
Driving without car insurance is illegal, but it’s not only the specific punishment for the offence that should deter you from doing it.
Being caught driving without insurance can lead to six penalty points, a driving ban and an unlimited fine.
If you injure someone else or damage someone else’s property whilst driving without insurance it could also mean you are liable for their costs. Personal injury claims can run into millions.
Car insurance comes in three main types, but the detail of what is covered will vary from policy to policy.
The three main types of car insurance policy are:
- third party — designed to cover claims for damage to other people and other people’s property
- third party, fire and theft — designed to offer the same cover as ‘third-party’ insurance with the addition of payments towards repair or replacement if your car is stolen or set alight
- Comprehensive — covers all of the above, plus payments for repair of damage to your vehicle caused in collisions or other events.
A common mistake is believing that comprehensive car insurance policies all include cover to drive other vehicles apart from the one specified in the policy. That is sometimes, but not always, the case.
Another easy mistake is to always assume that third-party insurance is cheaper than comprehensive cover.
Strangely, that isn’t always true.
‘Fronting’ is also a danger, especially for young drivers. Fronting means naming someone on the policy as the main driver of the vehicle when it is not true, such as a parent or more experienced driver, in order to get a cheaper quote. This could be seen as fraud and invalidate the cover.
If you lose track of your policy documents, it’s possible to check if you have car insurance via an online tool.
2. Home insurance
Home insurance falls into two main categories:
- Buildings insurance — covering the structure
- Contents insurance — for the belongings within
Mortgage providers will usually insist on borrowers taking out buildings insurance before they agree to lend the money to buy a house. They want to know an insurance company will cover the cost of repairs if there is a fault in the building so that it retains its value and they can get their money back.
In rented properties, buildings insurance is usually the responsibility of the landlord, whilst contents cover is left to the tenant to arrange. Without it, if there is a break-in, fire or flood, none of the tenant’s possessions will be covered.
In some cases students’ possessions may be covered under university policies if they live in halls or by an extension of their family’s home insurance.
House insurance may be invalidated if security features that have been declared to the insurance provider, such as a house alarm, are not in use when an incident occurs. Carelessness, like leaving a window open, may also invalidate a claim.
3. Travel insurance
Travel insurance is not obligatory and it’s easy to convince yourself that not buying it is a sensible saving, but the dangers of that choice are huge.
There are vastly different levels of travel insurance cover and when buying it, it’s vital to check exactly what is included.
Policies are not only there to provide refunds if trips are cancelled due to reasons stipulated in the policy.
Good policies will also offer medical and repatriation costs. That should include the cost of you being cared for if you suffer a serious accident or injury and getting you home, even if it has to be with medical assistance.
Remember, the UK is unusual in providing free healthcare. Medical costs run into hundreds even for simple things abroad and easily reach tens and hundreds of thousands for more complex care.
Specific cover for more risky pursuits, like skiing is also important. Many policies will not cover this.
Failing to disclose relevant issues such as a medical condition, could leave you without cover.
The most important thing
The most important thing to remember when buying any type of insurance is to read the policy document closely and ensure it covers everything you need.
Sometimes an unexpected event will leave you without cover. The many businesses that did not have business interruption cover for a global pandemic could never have predicted how much they were going to need it. Even if they could have done, the chances are the premiums would have been far too high for them to realistically consider buying it.
It is possible, though, to ensure you haven’t cut corners on cover for more likely and regular events.
Shopping around for a cheaper quote on insurance is important. Those who stay with the same provider year-after-year are unlikely to get a competitive deal, but buying the cheapest product is not always a good deal. Get a quote and then check the small print!