What’s Not Covered?

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We get into a lot of trouble with shortcuts. Surely everybody knows that standard fire and general cover for your home "doesn't cover flooding here!" Doesn't everybody know that total and permanent disablement doesn't cover the loss of only one leg? Doesn't everybody know that six months business interruption insurance isn't enough?

Thursday, February 3rd 2011, 10:02AM

by Russell Hutchinson

I could go on, and on. These are only three examples out of recent news. I have family who were surprised to discover that most home insurance pays out for you to live in another home while yours is being rebuilt - but only for six months - which is less than it usually takes...

While complicated systems make a virtue of collecting lots of information about a client and recommending lots of cover it's not the extent of the cover recommended that causes the most problems. It's the extent of the cover excluded, not recommended, or simply not thought about.

That's why what's not covered is the most powerful question of all. I think it should feature much more in the start of the insurance fact-finding discussion and also at the end of the sales process.

At the beginning of the work with the client a risk profiling discussion needs to lay out the hazards - here's the approach for life and personal insurance: major medical problem, disablement, major trauma, death, and total disablement - in that order with a reasonable presentation of the likelihood of each risk. That way the client can make a choice about whether to cover what is most likely to happen.

At the end of the work we then need to check with more rigour - because no matter how much insurance is sold there are always exclusions. I think these should have specific sign off. That way, everybody will know what everybody knows isn't covered.

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