Insurance cases are full of stories of insured people who end up not covered for what they thought they were.  This can arise from many causes.  Here are a couple of the common reasons for lack of cover:

Failure to read and understand the policy terms. 

A good example of this is a recent case where the Insurance & Financial Services Ombudsman has rejected a claim by an insured under their travel insurance policy.  The insured had arranged a trip to the USA which involved a classic car hire package, as they were intending to drive Route 66.  They prepaid $14,000 for the package of accommodation and classic car hire, but the hire company went bust before the trip and the insureds lost their deposit.

The insurer declined the claim because of an exclusion in the policy for claims arising from financial collapse of any service provider. 

Although it would seem that buying travel insurance to protect you from financial collapse would be a normal expectation, the Ombudsman held that the exclusion of such cover is common in travel policies and there was no duty on the insurer to bring this exclusion specifically to the notice of the insured.  The duty was on the insured to read and understand the terms and conditions of the policy and they should have noticed that the policy excluded financial collapse.

Assumptions of what is covered do not win out over the words of the policy.  To ensure you know what cover you have, read the policy.  Does it cover what you want it to cover?  If not, seek help to find an alternative policy or insurer who will provide the cover you need.

Failure to declare relevant information. 

A failure to advise an insurer of relevant information will enable the insurer to void the policy when a claim is made, because they would either not have offered insurance if they had known the information, or would have imposed different conditions (or price).

This commonly arises with a failure to declare past medical history accurately.  It pays to declare everything and provide access to your medical notes, so the insurer cannot say you did not disclose information.

Many people do not realise that a failure to disclose information also relates to increased premium loadings and increased excesses. 

In a recent example the Insurance & Financial Services Ombudsman has upheld an insurer’s refusal to provide cover under a house and contents policy.  The insured had arranged insurance on their house, contents and three vehicles and made a claim when one of the vehicles was broken into.

The insurer declined the claim because the insured had failed to disclose that their previous insurer had imposed an additional excess on their contents policy.

The existence of this additional excess was a material fact which would have influenced the insurer’s decision to insure, or the terms upon which they offered insurance.  Two independent underwriters confirmed that the existence of the increased excess would be material to the offering of insurance and the Ombudsman therefore concluded that the insurer was entitled to void the policy for non-disclosure and decline the claim.

The failure to disclose can be either deliberate (fraud) or inadvertent (mistake).  Either way the insurer can avoid the policy leaving the insured with no cover.  So answer all the questions honestly and fully, disclose all relevant information (even if not asked) and read the fine print closely.

Alan Knowsley

Insurance Lawyer