From my previous blog creating awareness of exclusions clauses in your policies the reality is:
It is about business
The provider of your insurance has a business plan to keep viable. The bottom line is that the premiums (contributions received from all members of the scheme) need to be more than claims paid out.
The provider of your insurance has a business plan to keep viable. Premiums (contributions received from all members of the scheme) need to be more than claims paid out.
So they will be very aware of the risk you present to them in terms of claiming as well as environmental risks which affect the pool of members. This is where certain standard exclusions are imposed. These create a blanket effect on their entire model and this reduces their risk significantly. Acts of god – earthquakes and floods for example.
Medical aids are at risk
With medical aids the regulations do not allow them to refuse you as a member, so you can join any scheme you want to at any age. However, regulations are also in place to allow the medical scheme to apply conditions to protect them from people joining only when they need to. For example, one could stay off a medical aid until you need an operation. Join the scheme, have the op and then leave after the recovery. A huge bill would then be paid by the scheme with a very small contribution.
Medical aids therefore are entitled to exclude any pre-existing conditions when you apply for a period determined by the condition and the risk related to it. They are also allowed to apply a penalty or loading to your premium if you have not been a continuous member of another scheme. This loading allows them to recover premiums in anticipation of the risks of future claims.
Life companies focus on your health and lifestyle risk
Life assurance companies which offer life cover without medicals will also apply exclusions for certain pre-existing conditions. If you already have a life threatening disease you bet the assurer has an exclusion clause in place safeguarding it from your pending claim.
Be more savvy with your policy
So understanding how insurance works will help you make more reasonable choices.
- You get what you pay for – cheap is not necessarily better
- Check to see what benefits are actually provided for
- Declare everything at application – rather overstate than leave things out
- Don’t hide anything – keep honest and transparent
It is better to be rejected on application and save all those premiums than start a policy and be rejected when you have a claim.