I have been working in the insurance industry not for long but if I were to tell you all the episodes where I had to deal with clients, you will start thinking I am a comedian. I remember vividly one client who took a motor vehicle insurance policy. She came to my office one day up in arms to talk to me.
“Where is Mr. Gift? I need to see him right away!” the client said.
“Please come in. Let me help you”, I said gently.
“I want to know why I have been asked to pay for so long without having any accident or fortuitous circumstances”, she said with a slight bit of anger.
“Actually, Miss Green you should be grateful that such incidents have not yet happened to you because your record will be bad if you claim quite often”, I said.
“Since nothing happened to me in over 5 years can I now have all my money back I have been paying?” she demanded.
“I am sorry Miss Green we do not have a cash back clause for your car insurance policy. But just to be clear, your premiums were not meant for you to have an accident. You were just covering yourself in the case of unforeseen circumstances whether you had an accident or not. In this case, you should be glad. The insurance policy you took covered you whether you had an unforeseeable situation or not”, I explained and explained. Miss Green began to nod her head in agreement. You could tell she was disappointed. Probably she was having a financial difficulty and thought her premiums will come to the rescue. This is not how an insurance policy works. Here are few things an insurance policy holder should always remember:
Insurance premiums are not savings for a future claim
Some people believe that insurance works like a bank savings account. This is not the case. When you serve your policy by monthly or yearly premiums those are not your savings. Some insurance policies have cash back clauses especially funeral ones where you can claim 10% of the total premiums after 5-10 years of not claiming. Remember that insurance policies differ but saying you need all your money back because you have not had an unforeseeable situation is not wise. It all depends on the policy and the length of time you have to wait before the cash back clause is enforced. Remember that your premiums covered you unconditionally – whether you had an accident or not. So even times where you were not involved in fortuitous circumstances you were still covered. We had your back all the time. Some insurance policies can reduce your premiums based on your claims frequency.
Refer to your policy documents
Do not forget to ask for your policy document from your insurance agent or broker. The policy document is proof that you have an insurance policy. Some people like to say they have an insurance policy but they do not have the policy documents. The policy document contains the policy number which is very important in determining your claims and whether you have been serving the insurance policy or not. The document is also important because it informs you as the policy holder, your rights, what you can claim and procedures to be followed in the case of policy termination.
Mpho Bosupeng is a graduate in Finance and has keen interest in financial and economic research. He is experienced in the insurance industry.