Insurance Tips
 
WHAT YOU SHOULD KNOW ABOUT MOTOR INSURANCE.

Vehicle owners regularly shop around for their best deal in motor insurance. Before you start comparing what's available, remember the cheapest is not necessarily the best and different quotes may be for different coverage.  It's important to check whether the policy you intend to buy meets your needs.  The usual types of cover available are:

  • Third Party - This gives cover against liability to third parties, not only in respect of death or bodily injury, but also for damage to third party property.
  • Third Party, Fire & Theft - This adds cover for the risks of fire or theft damage to the insured's own vehicle.
  • Comprehensive - This includes all the risks described above as well as the very important element of accidental damage to the insured's own vehicle

Depending on the age and condition of your vehicle, you may not be able to get Fire & Theft or Comprehensive insurance.

Most policies have driver restrictions, so check the insurance certificate or policy before allowing anyone to drive your vehicle for any purpose.

Most policies pay the lower of the sum insured or the market value of the vehicle at the time of the loss or damage. This is why you need to have your car inspected and valued before the policy is issued or at the next renewal.

Policy holders who have made no claims may be eligible for a discount. This eligibility may be lost if the insurer has to pay you for a claim, even when the accident was not your fault. The scale of discounts varies, but a policy holder who has earned a no claim discount with one insurer and changes insurers will usually be given a discount by the new insurer, providing they can produce documentary proof of entitlement.

If you are changing vehicles, your discount can be transferred from the vehicle you are selling to the new vehicle you are buying.You must tell your insurance agent of any changes in the details given on your application, such as address, occupation, type of car and motoring convictions. It is an offence to make a false statement or withhold information for the purposes of obtaining a certificate of insurance, and it could also invalidate your insurance policy.


WHAT TO DO IF YOU ARE INVOLVED IN A MOTOR ACCIDENT.

  • Check for injured persons, note the type of injuries and call for the ambulance if necessary, and the police.
  • Look for witnesses and write down their names and addresses.
  • Obtain details of the other vehicle(s) namely: When a policeman arrives, write down his/her name and number and answer all questions to the best of your ability.
    • Name shown on licence disk;
    • Number on licence plate;
    • Make, model and colour;
    • Name, address and phone number of the driver;
    • Name of insurance company;
  • Do not enter into any agreement to fix the other person's vehicle, no matter how obvious it is that you are at fault. Simply say that you are insured and refer them to your insurance company or agent.
  • If your vehicle is disabled and cannot be driven, have it towed to your home if possible, as most towing companies do not tell you about their storage fees which could be $20 or more per day.
  • As soon as possible visit your insurance agent with your driver's licence and complete an accident report.
  • Obtain at least two estimates for repairs to your vehicle.


FRAUD AND THE COST OF MOTOR INSURANCE.

Motor insurance fraud is a larger problem than many people think. It is estimated that between 15 and 20 per cent of the money insurers pay out are for claims for damage arising from accidents that never happened and inflation of claims to include damage or loss that did not occur or was not attributable to the accident reported.

Insurers have to spend large sums to root out both criminal fraudsters and otherwise honest policyholders who inflate their losses, resulting in higher insurance premiums for all.

If you know of someone who has committed fraud, or is planning to commit this crime you should advise the Police, or you can call Crime Stoppers at 328-8477 (328-TIPS). This number is answered on behalf of the Bahamian Crime Stoppers Foundation by the Miami/Dade Crime Stoppers in Florida, thus guaranteeing anonymity.


MORE ACCIDENTS AND HIGHER REPAIR COSTS CAN DRIVE MOTOR INSURANCE PREMIUMS UP.

The premiums paid to motor insurers are used to pay for the damage and losses that result when an accident takes place. Insurers have to make sure the money they collect is sufficient to meet their expenses. When their costs go up, premiums must also rise.

It's plain to see there has been an increase in the number of cars on the road, so it follows that more accidents will occur. But as long as the number of accidents per thousand cars does not increase and the average cost of an individual accident does not go up, the cost of insurance does not rise. The extra cars contribute enough additional money to pay for the larger number of claims.

Unfortunately, the influx of cars has lead to increasingly crowded roads and an escalation in the number of accidents per thousand cars, with a resulting increase in costs to insurers.

Further, cars built today are more complicated than those built five or ten years ago, and are more difficult and expensive to repair. And medical technologies have improved so people who would have died from injuries now happily recover, but these better services have a price.

Through its efforts to improve road conditions, government has shown its intention to reduce traffic congestion. But until these improvements are made, drivers need to be alert and drive defensively, both to safeguard their lives and property and to help keep motor insurance rates down.


HOW TO INSURE YOUR HOME.

When you take out insurance you are covering yourself against the unexpected. You want to be protected in case you're burgled, or your house burns down, or hurricane force winds wreck your roof and rain destroys the contents of your home. If you do not have insurance that provides adequate protection you could face serious money troubles if disaster strikes.

Insurance policies can vary considerably in what they offer. Take as much care over choosing one as you would in buying a new car. If your house burns down, or is destroyed in a hurricane, will you get enough cash to repair or rebuild it? Will you be able to replace all your stolen property? If you have an old policy does it allow for new purchases and price increases since you first arranged it?

When choosing household insurance, you must first:

  • Decide exactly what you want insured. This can include your buildings, your contents or particular valuables (like jewellery, cameras, or silver).
  • Find out exactly what the policies cover, compare the terms and charges (called premiums), and choose the one that suits you best. If a policy doesn't provide the coverage you want, ask the insurance agent or broker what changes are possible.
  • Look out for any exclusions (what a policy doesn't cover) and check whether you will have to pay the first part of any claim, called an excess.

Fill in your application very carefully and truthfully. You are responsible for the accuracy of your answers and your policy may be invalid if you give false information. Tell them anything about yourself that may affect their decision to insure you, like a criminal conviction or past burglary loss.

Insuring your home

Most policies require that buildings should be insured for their full rebuilding cost, not the price you would normally expect to sell them for. Don't under-insure. Insuring for less than the cost of rebuilding your home could result in a claim not being met in full, even when it is a claim for partial damage and less than the sum insured.

It is up to you to work out the cost of rebuilding your home. For a quick estimate of the amount multiply the area building costs per square foot by the total square footage of your house. To find out the area building cost in your area, you may consult a member of the Institute of Bahamian Architects or a contractor.

Check the insured value of your home each year against any possible increase in the area construction cost. Some policies may offer Automatic Inflation Clauses that increase the insured value(s) each year to reflect any increase in the cost of construction.

Do not insure your home for the market value. The cost of rebuilding your home may be higher (or lower) than the price you paid for it or the price you are able to sell it for.

You must tell your insurer immediately about any changes in your circumstances that would affect your insurance, for example, if you add an apartment to the house and do not tell your insurer your policy may be invalidated. It is best to keep a written record of all your contacts with the insurer.

Tell the insurer or broker about any major changes to your home like an extension, or central air conditioning as soon as you start the work.

If you live in an apartment, the owner normally arranges the insurance on the building. Check what your lease says and that there is adequate cover.

Insuring your belongings

You'll want to insure your household contents generally, clothes and other belongings. Tell the insurer about items such as jewellery, furs, silver or a valuable painting, which might need separate or extra cover.

Make a list to help you value your belongings and keep it up to date. Take photographs to help police to recover the items if they are stolen. It will also make claiming on the insurance easier. If you have any particularly valuable items get them professionally valued, and obtain a certificate giving a full description.

Decide what kind of insurance cover you need. There are two ways to insure your belongings:

  • Replacement Value Insurance pays the dollar amount needed to replace damaged personal property with items of like kind or quality without deduction for depreciation.
  • Actual Cash Value Insurance provides an amount equal to the replacement value of damaged property less any depreciation. Unless a policy specifies that the property is covered for its replacement value, the coverage is for actual cash value.

Don't forget the importance of insuring yourself for liabilities toward other people. Almost all household and contents policies provide cover of this sort for example against your responsibility for injuries to visitors and damage to their property, or accidents caused by your family.


MAKING A CLAIM FOR A HURRICANE LOSS.

If you should ever have to deal with our claims department after suffering the misfortune of a hurricane, there are some things you should know to make your claim go smoothly.

Although your agent should have a copy of your insurance policy, try and find your copy of the policy and read it. Policies usually pay for temporary repairs to protect your home from further damage and either the actual value or the replacement value of the damaged property.

Flood caused by a hurricane is normally included as part of your hurricane cover. Your policy may also pay for removing building debris so repairs can be made, but will not pay for clearing landscaping and garden debris.

Call to tell your agent if you're in an emergency situation. Unless instructed otherwise, only make repairs necessary to prevent further damage to your home or business. Don't make permanent repairs without consulting. An insurance adjuster will visit your home or business. Before the adjuster arrives, prepare a list of all damaged and destroyed property. The list should include:
  • a description of each item;
  • date of purchase;
  • cost at time of purchase;
  • present replacement cost.

If you have cancelled cheques or receipts for these items, collect them to show the adjuster.

It is a good idea to take photographs or videos of the damaged areas, and if possible, get a detailed estimate for repairs. Also make sure to keep all receipts for all work done on your home or property.

You might get more than one cheque, the first for part payment of your claim, with a later cheque once the full repairs costs have been agreed or carried out.


GET THE RIGHT SUM INSURED.

For those people fortunate enough to own their own home, the property usually represents their most important and valuable asset. Purchasing the right amount of insurance is essential to protect their home from the hardship that would result from loss or damage caused by fire, or by hurricane.

The basis of insurance is the idea that one person may not be able to afford the loss of a house or car, but a large group of people can afford to replace one house or car out of many houses or cars. Insurance lets a large group of people pool their money to cover against the possibility of loss or damage to their homes or cars so the few people who actually suffer such loss or damage can draw from that pool to repair or rebuild.

Insurers set their rates on the basis that they are insuring whole buildings, not just the part most likely to be damaged. It follows that a policy holder who insures his house for less than its true replacement cost is not making the proper contribution to the insurance pool and any recovery from the pool should be in proportion to the amount contributed.

For example, if you pay a premium based on a sum insured of $100,000, when it would cost $200,000 to rebuild your home you are only contributing half of the amount you should be to the insurance pool used to pay for losses. You should therefore be repaid only one half of any damages resulting from causes covered by the policy if you have to make a claim.

All insurance policies have what is commonly called an Average clause (this clause can have other names, but the effect is the same). This clause says your insurer will do the following sum when working out what should be paid for a claim:

(Sum Insured/Actual Cost to Replace) X Cost to repair damages = Amount that will be paid

If it is agreed it will cost $75,000 to repair your house, they will offer:

($100,000/$200,000) X $75,000 = $37,500

Because you had only insured the house for half of what it should have been insured for you are getting only half of the cost of repair, even although the damage did not exceed the sum insured. In the event of a total loss you will get the sum insured, but then this will be only half of what you have lost.

Each item on your policy is separately subject to this condition of Average as it is called, so check not only the building sum insured, but also the contents sum insured.

On most policies there is no deductible for damage by fire. But, if the loss had been due to a hurricane or windstorm there is a deductible which is usually a minimum of 2 per cent of the sum insured. In the above example, the insurer would further reduce the amount paid to you by 2 per cent of $100,000, or $2,000, and you will receive $35,500 toward your loss, whereas if you had insured for the correct amount of $200,000 you would have received $71,000 toward the damage from the storm.

Another thing to remember is insurers will not pay more that the cost to replace or repair, so you should not over insure. If you do, you will be paying more premium than you need to, with no benefit to yourself.

INSURABLE INTEREST.
For insurance to be valid the insured must
  1. Benefit from the survival of the subject matter insured, or
  2. Suffer when loss or damage to the matter insurer occurs, or
  3. Incur liability in respect of the subject matter insured.
In the absence of any of these interests, known as an insurable interest, the insurance policy will be an invalid contract and the insurer will not pay out. Every person has an insurable interest in their own life and spouses are deemed to have an interest in each other's lives. Similarly, if you own a vehicle you would suffer when damage occurs to the vehicle and would also have an interest in protecting yourself from any liability to third parties incurred by you from the operation of the vehicle.

IN BUSINESS – THINK INSURANCE & UNDERSTAND INSURANCE.

Being in business inevitably involves risk, but when you consider that some risks like a fire or burglary could wipe out a business that has taken years to build up, you can see why it is vital to be adequately insured.

A typical commercial fire policy will have three sections. The first covers the Building or structure. It is recommended that the policy be written to include the full replacement cost, including debris removal and professional fees, ideally specifying separate sums insured for each of these items, so both your insurer and you know they are there and allowed for. And it would be wise to consult a qualified surveyor rather than risk getting your sums wrong.

The second section of the fire policy covers stock. This should be valued at your purchase price (plus freight and duty) without any addition to cover your projected profit. If a loss occurs the claim will have to be substantiated, so full records of purchases and sales must be kept.

The third section of the policy deals with fixtures and fittings not included under the Building section, plus plant and business equipment not allowed for under the stock section. For this section the sum insured should be the cost to replace, less an allowance for depreciation.

In addition to basic fire and lightning coverage, the policy can be extended to include a number of other events such as hurricane, flood, riot damage and theft (although theft is usually written on a separate policy form). Additional business interruption insurance that may cushion the effects of the loss of income resulting from a major fire or other disaster is also worth considering.

A commercial theft policy covers loss of articles resulting from theft involving forcible entry, and may include the cost of repairing damages to the premises.

Losses from walk-in thefts or shop lifting would not be covered, and glass damage must be covered under a separate glass policy. Money is also excluded from a Theft policy and should be covered under a specialised money policy.

Other types of policies to consider would cover such things as your liability to your customers or employees to recover losses resulting from an injury suffered on your premises.


CONDITION OF AVERAGE.

Everyone likes to save money, but when it comes to insuring your most valuable assets saving a little now can cost you a great deal later if your insurance doesn't reflect the true replacement value of your home and its contents and you suffer loss or damage.

The basic principle of home and contents insurance is it lets a large group of people pool their money to cover against the possibility of loss or damage so the few people who actually suffer misfortune can draw from that pool to repair or rebuild.

Your insurance rate is set on the premise that the Insurance Company is insuring the whole building, not just the part most likely to be damaged. It follows if the sum insured is less than it should be to fully rebuild your home or to replace your belongings at today's prices, you are determined to be under-insured. You're not making a fair and sufficient contribution to the insurance pool and any recovery from the pool must therefore be in proportion to the amount contributed.

Your policy includes an Average Clause which is standard for the industry. It determines the rate at which your claim may be reduced. For example, if you insure a building for $500,000 and the actual cost of replacing the building at current rates is $600,000, you are under-insured by $100,000 or 16.67% of the actual reinstatement value. Any claim you make will therefore be reduced by this percentage and you are determined to be self-insured for the difference.

Using this formula, if you suffer partial damages valued at $60,000, for example, your claim settlement will be reduced by $10,000 (16.67% of $60,000), and could be further reduced by policy deductibles. You will receive a maximum settlement of $50,000 and will be out-of-pocket for the remainder.

It's an unfortunate fact that most people who under-insure simply underestimate the true value of their home and contents or they fail to recognize the rising replacement value of their property over time and don't increase their policy accordingly.

The basic sum you insure needs to be established correctly to avoid the application of the Average Clause in the event of a loss. We recommend a professional valuation or appraisal be carried out whenever you're taking out a new policy or renewing an existing one. Your N.U.C.A. agent can help you in getting in touch with an independent appraiser.