Insurance can feel overwhelming, especially when it comes to understanding the language used in your policy. Here, we demystify some common insurance terms related to insurance claims.
Average
The concept of average applies when a claim is made in situations of under-insurance (when your insured sum is less than the actual value of the insured property).
Example:
- Sum insured: R200,000
- Value at risk: R300,000
- Loss (repairs): R60,000
The settlement would be:
(R200,000/R300,000) × R60,000 = R40,000
To avoid under-insurance and reduced payouts, ensure your assets are insured for their full replacement value.
Agreed Value
For certain high-value items like classic cars or rare artwork, you can opt for agreed value coverage. This means you and your insurer agree on a set value for the item at the policy’s inception. In case of a total loss, the insurer pays this agreed value.
Excess (First Amount Payable)
The excess is the portion of a claim you pay out of pocket before your insurer steps in. It can be a fixed amount or a percentage of the claim.
Example:
If your policy states an excess of 10% or a minimum of R1,000.
- Claim of R100,000: Excess = R10,000
- Claim of R5,000: Excess = Minimum R1,000
A higher excess often results in lower premiums, but you’ll pay more in the event of a claim.
Proximate Cause
This term refers to the direct cause of a loss that has not been interrupted by other events. Insurers only cover claims for insured events directly causing the loss.
Example:
A shop insures its windows against all risks except fire. A fire nearby causes a mob to riot, breaking the windows. The proximate cause is the riot, not the fire, so the insurer will cover the damage.
Reject vs. Repudiate
- Reject: The insurer declines to pay a claim, or part of it, based on the terms of the client’s policy.
- Repudiate: Similar to reject, but involves other reasons like misrepresentation or fraud.
Always review the reasons provided if your claim is rejected or repudiated.
Cash-Back and No-Claim Bonuses
- Cash-back bonus: Some insurers reward policyholders with a cash payout for not claiming over a specific period.
- No-claim bonus: A discount on your premium based on your claim history. Claiming can reduce this discount.
Write-Offs
A write-off occurs when an item, often a vehicle, is deemed beyond repair or uneconomical to fix. Vehicles are classified into codes depending on their condition:
- Code 2: Repairable but uneconomical under the policy.
- Code 4: Permanently demolished.
If your vehicle is written off, the insurer will compensate you based on the insured value.
Simplifying Insurance for You
At dosture.co.za, we’re dedicated to making insurance simple and hassle-free, ensuring you get the coverage you need without any confusion.
