If not managed correctly, your insurance can turn into a total nightmare. If you do not know what you’re doing when taking out insurance, you can easily be taken for a ride by insurance companies. Luckily this is more the exception rather than a rule, but some companies are only out there to make money. They might be charging you a ridiculous amount for a below-standard policy. This can be avoided by asking insurance companies a couple of simple questions:

It is important to know exactly what your policy will cover. Never ever assume that you will be completely covered, regardless of the type of insurance you take out! If the company knows that you are looking for the cheapest car insurance policy available (just to use an example) the might offer you a liability insurance or a third party insurance policy. This might sound very good to you, but do you realize that liability insurance only covers injuries and not damages? And third party insurance covers the other party’s costs, not your damages and expenses! To avoid unpleasant surprises it is crucial to ensure that the company explains your policy to you in easy to understand terms!

Who do I contact when I’m involved in an accident? Some insurance companies try to make the claiming process as difficult as possible so that clients in the end just throw in the towel and forget about claiming. Make sure that you have the direct contact details for the person who will be responsible for handling your claim. Don’t accept the “we will tell you once you’ve made your first payment” sales pitch. Insist on these details before spending a penny.

Do you offer value added services of discounts? Some companies offer value added services such as cash back bonuses if you don’t claim for a certain period of time or discounts when you are a new customer or buy more than one insurance products from the same company. Companies are however not obliged to inform you about these special offers, so make sure that you enquire about it!

If you are offered a better policy by another company or you want to cancel your existing policy for any other reason, you should know what the procedure will be. You might be charged a percentage of your remaining premiums or you could be penalized with a hefty cancellation fee. Some insurance companies can even build in a clause which will not allow you to switch or cancel your policy before the end of your policy’s term. This could result in a lot of money being thrown in the water as you will in effect be paying for something that you are not using or which doesn’t exist anymore! Never allow insurance companies to keep you prisoner. It is your money; therefore it should be your decision!

What are the restrictions on this policy? Using car insurance as an example again, some companies might not pay out if you’re involved in an accident when driving to a client for a meeting. They might see this as a claim for business insurance, rather than standard car insurance. If you’re taking out medical insurance, enquire about which procedures and conditions will be excluded from the policy. Being underinsured or not correctly insured can also be fatal!

If you are not satisfied with the answers you get to the above questions, warning lights should flicker! There are a lot of insurance companies out there, choose one you feel comfortable with!

For more information about insurance companies, go to http://www.insurance.co.za.