Understanding Insurance Duties

Explanation of Insurance Duties for Better Understanding

Most of us take out insurance policies of some form or another as adults, and these insurance policies help provide us with protection and peace of mind in the event of various unforeseen circumstances. Although there is plenty of choice available when it comes to insurance plans these days, insurance can be quite a complicated area.

There are a number of duties and responsibilities relating to insurance cover, and these duties apply to both the insurance provider and the person who is taking out the insurance. There are some things that are the responsibility of the insurance provider and others that are the duty of the consumer. By knowing who is responsible for what under official regulations you can have greater peace of mind with regards to any insurance cover that you take out.

Important Duties And Responsibilities

First off, you should always make sure you check the details and small print of any insurance policy you are looking to take out, as this will provide you with vital details about your duties as the policyholder and the duties of the insurance provider. It is important that these duties and responsibilities are adhered to by both parties to ensure the validity of the cover.

Some of the duties of the insurance provider include:

  • Providing details of policy restrictions: It is the duty of your insurance provider to issue you with details of the restrictions on the policy. This is something that needs to be done before you sign on the dotted line and before any insurance documents are issued. In order to comply with this, the insurance provider needs to provide you with a copy of the policy, in which the language should be clear and easy to understand.
  • Changes to the terms of the policy: Insurance companies can and do make changes to insurance plans and policies. However, it is the duty of the provider to inform you in plenty of time of any changes, particularly if they might have an adverse effect on you and your right to claim. If the insurance firm fails to notify you of changes, and you then find that you cannot make a claim as a result of the changes that you were not notified of, you may be able to challenge the provider.
  • Changes to premiums: If your insurance provider decides to increase your premiums, it is their duty to provide you with adequate notice to the change in premiums.
  • Policy expiry: It is the duty of the insurance provider to contact customers to advise them that their insurance policy is due to expire and advise whether they are prepared to renew the policy. At this time any details of changes to terms of the policy and premiums should also be provided so that consumers can make an informed decision with regards to whether to renew. If the insurance firm fails to contact you the plan generally continues unless you have taken out alternative cover or unless you contact the insurance firm to cancel the cover.

Some of the duties of consumers and policyholders include:

  • Disclosure of information: When you make your application for insurance cover you must ensure that you provide honest and accurate answers to all questions on the form. You should make sure that you disclose any information that is likely to be relevant to the cover that you are taking, even if you do not think that this would necessarily affect the risk levels for the insurance firm. It is important to bear in mind that failure to disclose information or provide accurate and honest answers to questions on the application could result in the insurance firm refusing to pay out in the event of a claim if they discover that you falsified information or failed to disclose key information.
  • Changes in circumstances: If your circumstances change once you have taken out the insurance policy it is your duty as the policyholder to ensure that you inform the insurance firm about the changes as soon as possible. Even if you believe that the changes will not greatly affect the risk to the insurance firm or the cost of cover, you should still make sure that you provide these details to the insurance firm. This could be anything from a change in your health to changes in your household, change of job, change of address, etc. The changes that will be relevant will be based on the changes themselves and the type of insurance cover that you have.
  • Renewal: It is the duty of the provider to inform you when your insurance cover is due to expire, giving you the opportunity to renew. However, some insurance firms have automatic renewal in place, where you policy continues unless you actively cancel. If you have automatic renewal on your plan, it is your duty to contact the insurance firm to cancel before the renewal date should you wish to do so.

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Richard Laycock

Richard is the senior insurance writer at finder.com.au and is on a mission to make insurance easier to understand.

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