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Money Expert - Diana Clement - Financial Planning, Career, Investing, Economy, Property - MSN NZ

The insurance snake pit

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Insurance is logical if you work in the industry. If you're not an insurer, then insurance can be pretty counter intuitive.

Take, for example, the driver who passed a breath test, but had his claim turned down for being under the influence of alcohol. The insurance assessor worked back from the time of the breath test to the accident and determined that the driver would have been over the limit at that time. Don't believe me? Read what the Insurance and Savings Ombudsman had to say about that case.

Whenever you take out a policy, read it. Be very careful indeed about what you say in writing or on the telephone to anyone involved in the claim — even companies doing repair work or replacements. It's very easy for your words to be misinterpreted as lies.

Here are some eye-openers about insurance I've learned over the years:

Declare everything
You need to declare anything that might be "material to a prudent insurer". That means everything. If you don't declare driving convictions, especially drink driving ones, your insurer can cancel the insurance if you claim instead of paying out. Even a 20-year-old fraud conviction is relevant to house contents and other types of insurance policies. If you've once had a dodgy smear or even minor heart glitches, your medical or life insurance could be invalidated if you don't declare them.

Pre-existing conditions
Every year there are new sad cases where life, critical illness, travel and other claims are declined because of "pre-existing conditions". These are illnesses that you have symptoms for when you take out the insurance. Often you don't even know that you have the illnesses. The insurance companies go through your medical history with a fine-toothed comb, only after you've made a claim.

Vehicle modifications
So you bought some shiny new mag wheels for your car and didn't inform the insurance company? Well, you've invalidated your insurance. The same goes for a big flash exhaust system or any other modification.

Lies, lies and more lies
A good proportion of Kiwis think it's okay to exaggerate a claim or tell a "white lie". Well it's not. One white lie is enough to have the entire claim declined, not just the part that you're lying about. Insurance investigators are often ex-policemen. They can smell a lie a mile off. Your insurer won't just refuse to pay out on that item. It will decline the entire claim if it finds even one white lie in your story.

Travel insurance
This branch of the snake pit is full of some really venomous reptiles. There are so many examples, I don't know where to start. One reader emailed me a few weeks ago pointing out that his BNZ gold card cover had a sneaky clause in it saying that you had to take up the rental car company's expensive additional cover before the BNZ would pay out. That isn't the norm. I've read the fine print of my ASB gold card travel insurance and it's much more straightforward. Another example is if you cancel a trip or curtail it because a family member becomes sick, the insurance company will decline your claim if that person had pre-existing conditions. It's not even the people on the policy who matter.

Finally, the moral of this story is: read, read and re-read your insurance policy, tell the truth, try to deal with your insurance company in writing only, and don't take no for an answer: complain to the Insurance & Savings Ombudsman.

Have your say: Do you have any insurance horror stories to share?

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