Many entrepreneurs have recently been disappointed with insurance providers for not offering compensation for loss of earnings due to forced closures following the coronavirus crisis.
Insurers replied that payments will be made where the formulation of individual business interruption policies specifically covers a global pandemic and will be a rarity.
While disputes are likely to continue for some time over the validity of individual complaints, the situation recalls that the detail of the planning documents is crucial.
It was once said that in our world nothing is certain except death and taxes. The obligation, at some point, to purchase insurance is almost certain.
You are forced to purchase an insurance if you want to drive legally. In almost all cases, a mortgage company will require you to have insurance to lend you the money to buy a house. And while travel insurance isn't mandatory, when you go abroad, choosing not to buy it is dangerous.
There are other types of insurance that may be necessary or very wise to consider for a lifetime, but these three are almost inevitable:
1. Auto insurance
Driving without auto insurance is illegal, but it's not just the specific punishment for the crime that should deter you from doing so.
Getting caught driving without insurance can result in six penalty points, a driving ban and an unlimited fine.
If you injure someone else or damage someone else's property while driving without insurance, this could also mean that you are responsible for their costs. Personal injury claims can amount to millions.
Auto insurance is available in three main types, but the details of what is covered vary from policy to policy.
The three main types of auto insurance policy are:
third party – designed to cover claims for damages to other people and other people's property
third party, fire and theft – designed to offer the same coverage as "third party" insurance with the addition of payments for repair or replacement in the event of theft or fire of the car
Complete: covers all of the above, as well as payments to repair vehicle damage caused by collisions or other events.
A common mistake is to believe that full auto insurance policies include coverage for driving other vehicles than the one specified in the policy. This is sometimes, but not always, the case.
Another easy mistake is to assume that third party insurance is cheaper than global coverage.
Strangely, it is not always true.
Fronting is also a danger, especially for young drivers. Fronting means appointing someone on the policy as the main driver of the vehicle when it is not true, such as a parent or a more experienced driver, in order to get a cheaper quote. This could be seen as fraud and invalidating coverage.
If you lose track of your documents on the policy, you can check if you have auto insurance through an online tool.
2. Home insurance
Home insurance falls into two main categories:
Building insurance – covering the structure
Content insurance – for items inside
Mortgage providers usually insist that borrowers take out property insurance before agreeing to lend money to buy a home. They want to know that an insurance company will cover the cost of repairs if there is a defect in the building so that it retains its value and they can recover their money.
In rental properties, building insurance is usually the responsibility of the owner, while content coverage is left to the lessee to organize. Without it, in the event of a break-in, fire or flood, none of the tenant's assets will be covered.
In some cases students' assets may be covered by university policies if they live in classrooms or by an extension of their family's home insurance.
Home insurance can be invalidated if the security features that have been declared to the insurance provider, such as a home alarm, are not in use when an accident occurs. Neglect, such as leaving a window open, can also invalidate a claim.
3. Travel insurance
Travel insurance is not mandatory and it is easy to convince yourself that not buying it is a reasonable saving, but the dangers of that choice are enormous.
There are very different levels of travel insurance coverage and at the time of purchase it is essential to check exactly what is included.
Policies are not only there to provide refunds in the event of travel cancellation for policy reasons.
Good policies will also offer medical and repatriation costs. This should include the cost of your treatment if you suffer a serious accident or injury and bring you back home, even if it must be with medical assistance.
Remember, the UK is unusual in providing free health care. Medical costs amount to hundreds even for simple things abroad and easily reach tens and hundreds of thousands for more complex treatments.
Specific coverage for riskier activities such as skiing is also important. Many policies will not cover this.
Failure to disclose relevant problems such as a medical condition may leave you uncovered.
The most important thing
The most important thing to remember when buying any type of insurance is to read the policy document carefully and make sure it covers everything you need.
Sometimes an unexpected event will leave you uncovered. The many companies that did not have coverage for business interruption for a global pandemic could never have predicted how much they would need. Even if they could have done so, it is likely that the premiums would have been too high to be able to realistically consider the purchase.
However, you can make sure that you have not cut corners on the cover for more likely and regular events.
Shopping for a cheaper insurance quote is important. Those who stay with the same supplier year after year are unlikely to get a competitive deal, but buying the cheapest product isn't always a good deal. Request a quote and check the small print!
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