Insurance policies 101: claims explained

Many consumers are unaware that any insurance policy is a two-way agreement between the policyholder and the provider, that requires a level of transparency between parties to remain valid.

Here are some key factors that could result in a claim being denied, or a policy being voided or cancelled:

Claim rejection

Non-payment essentially constitutes a breach of contract if not paid within the period of grace and this may lead to a claim being rejected.

Lack of disclosure or altered risk behaviour may result in the rejection of a claim. For instance, you choose to upgrade your car and give your existing one to your child, only to have it involved in an accident.

When the incorrect person is noted as the regular driver, claims are often rejected, as the person behind the wheel isn’t noted as the “regular driver”.

It’s thus vital to keep your insurer up to date with any risk-altering life changes, as these could significantly impact the claims process.

Claims can also be rejected based on a lack of adherence to the terms of the contract.

For instance, certain policies require specific types of vehicle trackers to be installed – as different models are designed to track different varying elements like impact or speed.

Avoid cutting corners.

Cancellation vs voidance

Policy cancellation happens rarely and is typically the result of a falsified claim – for example someone who deliberately stages a hijacking or robbery so as to claim an insurance pay-out. In serious cases such as this, the policy may be cancelled due to breach of trust. This constitutes part of one’s permanent record and can have a serious impact on future insurance policies.

In less drastic cases – like when claims are made either due to recklessness or lack of disclosure regarding previous losses, cancellations or certain risk altering circumstances – a contract might be voided.

The policy would simply cease to exist and the insurer would refund premiums paid.