9 mistakes we make when buying insurance policies

Eunice Mburu, CEO of Bismart Insurance, an online insurance platform that allows one to compare various insurance companies and their products, speaks to JACQUELINE MAHUGU on what to avoid when buying a policy.

1. Paying cash to the agent

While most agents are honest, we still have some dishonest people in the insurance value chain. Many customers come to us when they have had an accident and they discover that they had an insurance sticker but no insurance.

They just sent cash to the agent and asked for car insurance, the money never got to the insurance company. One of the customers discovered that she never had an insurance cover for three years when she had an accident and was making a claim. The insurer told her that her car details have never been in their records.

2. Failure to take a medical examination

Some policies like group life (the insurance your employer provides) and individual life policies require that you go for medical examination for you to enjoy full insurance benefits. The medical examination enables them to decide if they will cover you or not.

If you go for the medical examination, even if an incident happens in the second month, your beneficiaries will get the full amount payable. However, if you do not go for the medical examination, for individual life and education policies, your family is denied the full insurance benefits upon maturity.

3. Not changing beneficiaries with the change of status

Many beneficiaries are unable to access insurance benefits after losing their loved ones because the nominated beneficiary no longer exists, or they are people who may not be interested in the well-being of your family. It is important to nominate the right beneficiary and change them when life situation changes, for instance when you get married, divorced or get more children.

4. Not informing your spouse or the nominated beneficiary

It is important to let your beneficiary know that you have taken an insurance cover. In the event of death, the family may be suffer despite you having taken insurance cover to protect them.

5. Focusing on price and not the benefits

Most customers call and ask for the cheapest insurance cover. While price is important, it is not the only factor to consider when you are buying an intangible service like insurance. For example, when a customer is buying a health insurance cover, they normally ask for the cheapest cover, and in most cases, the cheapest health cover has the least benefits and has more exclusions.

In car insurance, when you buy the cheapest and leave out extra optional covers like excess protector, or political and terrorism risks, you will discover the excess limit is quite high, yet you have to pay out of pocket before the claim is honored.

6. Not comparing covers before buying

Before you buy insurance, take time and understand what you are buying. Compare the waiting periods in case of health cover, compare the sub-limits that are applicable from different options, compare the excess limits in the case for motor insurance.

Do not just buy, but compare and understand the policy before purchase. This will save you a lot of disappointments at the point of claim. With online comparison platforms like www.bismart.co.ke, you can compare benefits, exclusions and price at your convenience.

7. Not reading the policy document

In case of life insurance, most people do not know that you can cancel your cover within 30 days from the day you receive the policy document. It is therefore advisable that you read the document and ask for clarification, so that in case you do not agree with the terms, you will be able to write to the insurance company before 30 days are over to cancel the cover and you will receive the entire premium you had paid.

8. Buying long-term policies with a short-term view

Most people buy these covers with the hope of cashing in when they have financial difficulties. It is very important that you understand that life insurance or the education policies are long-term plans, at least 5 years and above. This means that you cannot stop paying until that policy acquires what is called surrender value (the value of policy).

Most plans acquire a surrender value after 3 years of continuous payment of premium. This value is not equivalent to the amount you have contributed, it is mostly lower than the amount contributed. This means when you take such policies you must have a long-term view, otherwise if you discontinue before 3 years are over, you lose your contribution. In case of financial difficulties, it is advisable to negotiate with your insurer, either to reduce premiums or restructure the policy. Also, at the point of buying, you can buy a cover that has a retrenchment benefit or a premium break. 

9. Not disclosing pre-existing conditions

Insurance operates on the principle of utmost good faith, so it is expected that you will disclose everything that might affect the insurance. For example, if you have a pre-existing condition, it is important to disclose that when the taking cover. This allows the insurer to adjust the premiums accordingly and sometimes decline to cover you depending on the condition. This may save you money and the agony of your claim being declined while you have always thought you were insured.

10. Buying to keep off the agent

Insurance distribution in Kenya is done mostly by agents and brokers. Many customers buy insurance cover because the agent is a relative or a friend and they want to “promote” them and keep them off their back. This means that you end up buying a policy that you do not understand and may not meet your needs.

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