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september 2016 year
september 2016 year
Partner Andrey Kosenkov
exclusively for

3 Biggest Mistakes in Insurance Policies Which Result in Indemnity Denial

Partner Andrey Kosenkov
exclusively for

Concluding insurance agreement should be aimed, in the first place,  at receiving indemnity in case of unforeseen circumstances. Imagine the Client’s distress if the insurance company denies indemnity or pays for the damage only partly.

Since property insurance, especially voluntarily one is not that popular in our country compared to the western states, a lot of people do not understand let alone try to understand the nature of this insurance product.  

This article offers some pieces of advice stemming from the multiple claims settlements which refer to the incorrect actions of the Insured. Unfortunately often enough lack of knowledge leads to the indemnity denial or minimal compensation for the damage. To avoid such unpleasant experience my advice is to take the following three recommendations into consideration.  

Mistake # 1. Inaccurate information in the insurance application  

If the information included in the insurance application does not correspond with the actual characteristics of the property insured, that is the solid argument in favor of indemnity denial
This document comprises the integral part of the insurance agreement and contains the details regarding the insured object. If the information included in the insurance application does not correspond with the actual characteristics of the property insured, that is the solid argument in favor of indemnity denial. 

This doesn’t mean that those mistakes are always made deliberately to delude the insurance company. In most cases they stem from the reckless attitude towards this stage of concluding insurance policy.

The facts omitted in the insurance applications most frequently are the following: claims history, inaccurate information about the security or fire-fighting systems, as well as the technical parameters of the buildings or premises.

Mistake # 2. Insured does not possess valuable interest in the property insured

In some cases insurance agreement are concluded on behalf of legal entities which are not related to the insured property at all. Attempt to optimize taxes or conceal the actual corporate structure lie at the bottom of it. Best case scenario is when the Insured owns the property covered by the policy. If another legal entity has to be the Insured anyway, then there should exist some legal link such as lease or any other kind of agreement which allows for the use of the insured property by the Insured under the insurance policy.

Same rule applies to the individuals. The insurance policy should be signed by the property owner rather than his relatives or friends.

Mistake # 3. Inadequate set of insured perils

Any insurance agreement offers the coverage limited by the list of named perils or by “all risks” wording of the policy. It’s worth mentioning that each particular insured object deserves special attention in terms of specific risks they are exposed to.

Unfortunately sometimes we happened across companies which covered houses in the woods leaving out the peril of fallen trees, or malicious mischief was not included in the insurance agreement designed to cover residential dwellings. Other policies did not stipulate that the damage caused to the insured pharmaceuticals by the hot steam or hot water be covered.  

You are the one who knows the specific of your property and business. Therefore our advice is to check the set of perils properly not to allow any mistakes. 

All of the above does not guarantee the full indemnity for the insured events, as there are plenty of other nuances which will be revealed in the upcoming articles.

Nonetheless let’s not allow the denial result from your own negligence when signing the insurance agreement. The best choice is to deprive the insurance company of any chance to point out your omissions.