Policies & exclusion clauses

• Terms and conditions. This is usually a standard form so it doesn't deal with your personal situation or your specific relationship with the insurer. Of course insurers deal with thousands of insured people, so the terms and conditions must to some extent be universal;
• Policy schedule. This is where your personal details are recorded. It will include details such as your name and address; the amount of cover; type of insurance; details of the items insured e.g. your car type and model; special restrictions etc. It is prudent to ensure that the schedule and the terms and conditions are not in conflict, especially with regard to special restrictions.

You must ensure that your policy is kept in a safe place, and that someone else is aware of that place as well. You should also keep copies of all correspondence between yourself and the insurance company.

It is always a good idea to keep records of any valuable items in your house as proof of ownership.

It is a good idea to either act on the recommendation of a friend, if they have had dealings with a broker or company, or to carefully shop around for the best deal. This can include getting professional advice. Remember, this does not necessarily mean it will be the cheapest. At the time that you wish to claim on the policy you may find yourself far more interested in the way the company handles your claim.

Make sure you understand the policy, that its terms and conditions have been understood or adequately explained, and specifically what the insurance does and does not cover. If you are looking to deal with an insurance broker, find out if they are licensed with the ASIC.

• Be careful with questions that are not specific - if you do not disclose information it may be used to reject a claim at alter time.
• Answer all questions, even if you are not sure the question is relevant to you. Again, a lack of disclosure may be used to reject a claim.
• Always be prepared to give additional information, and if necessary attach a separate sheet of paper.
• Similarly, you can even add your own question and answer if you believe the printed questions do not cover your situation.
• Always do a final check when you receive the policy. Don't just put it in a drawer and forget about it! (and remember where you put it!).

The law obligates all parties to the insurance contract to act towards each other in "utmost good faith".

• fulfil your duty of disclosure (see "Duties" fact sheet);
• make honest statements in the application;
• fulfill the requests of the insurer.

• settle claims quickly;
• have a genuine reason to refuse claims;
• disclose restrictions in the policy.

Part of the duty of utmost good faith means that the insurer must specifically draw the insurer's attention to any exclusion clauses in the policy.

• Replacement or reinstatement policy. This replaces your content according to its current value, unless specific items (e.g. carpet) are to take into account wear and tear;
• Indemnity policy. This type of payment allows for depreciation of the asset at the time of the claim. In general these types of policies cheaper than a replacement policy, because the insurer will not have to pay out as much after taking account of the depreciation.

This is the temporary cover that most insurance companies will issue until you have taken a formal insurance policy. It only lasts for a limited period of time.

You have 14 days from the date you received the policy to cancel the contract. The company must refund the premium.

For most of us there will be annual renewals of insurance, especially for consumer insurance such as car and home.

The insurer has the right not to renew your policy, but the law requires that they inform you in writing whether a renewal is offered prior to the expiry of your current policy. Under the law the insurance will continue if the insurer fails to write to you with the information that the insurance is to expire. However, this will not apply if you have arranged other insurance. The insurer must give you at least 14 days notice that you must renew the policy.

It is crucial that you renew your policy before the current one expires. If you don't you will not be covered for any losses you suffer.

In some situations the insurer may agree to pay anyway, although this will often depend on the amount of the loss and the length of time you have held the insurance. However, you will not have the legal right to enforce the contract.

An exclusion clause is simply a part of the contract that operated to exclude, restrict or qualify the right of the insured. A good example of this is the usual clause in a car insurance policy that denies liability to pay a claim if the insured was over the legal alcohol limit.

• Who caused the loss? For instance, if you were smoking in bed at the time of a fire, and a fire caused this way is a breach of your policy, you may not in fact be in breach if the fire was caused by an electrical fault. In this case the fact that you were smoking in bed would be coincidental and not the cause of the fire.
• Did you know about the circumstance at the time you signed the policy? For instance, if you have disability insurance that requires disclosure of any pre-existing illness, the insurance company may not be able to rely on the exclusion clause if you were not aware of the illness that caused the loss.
• Is the exclusion clause unambiguous and clearly related to the event that took place?

Cancellation of the contract

The insurance company has the right to cancel the insurance if the insured has :

• failed to comply with either the duty of disclosure or the duty of utmost good faith;
• broken a condition of the contract or made a fraudulent claim.

The law requires minimum notice of cancellation e.g. 20 business days before the cancellation of a life insurance contract. In general you will receive a refund for the unexpired portion of the policy.

Read this: This fact sheet is intended to be general information about the law in Australia. It is not a substitute for legal or other professional advice. LAwscape Communications Pty Ltd, F2 Australia & New Zealand Pty Ltd or Moneymanager does not accept responsibility for loss to any person, who either acts or does not act because of this fact sheet.

(c) Lawscape Communications P/L