In episode 8 of Unsure? Insure! we look at reasons why claims won't get paid and share tips to help you get the most from your insurance.
Contrary to popular belief insurers do want to pay out claims, but there are some occasions where claims don’t get paid. I want to take a look at the common reasons why and share tips to help you make your insurance work for you.
Reason claims won't get paid #1: Claiming on a product you haven’t bought
Sometimes customers submit claims for products they don't have. For example, a freelancer might submit a claim for a stolen laptop when they haven’t bought contents insurance. Or a customer will want to use the debt recovery service, but they haven’t added legal expenses insurance to their policy.
This happens because it can be difficult remembering what insurance you bought when signing up.
Solution: Make a point of reviewing your policy a couple of times a year. If you’re in a line of work where your business is frequently changing (maybe you’re a film maker who is often adding new equipment to your kit bag), review your policy regularly.
I know this isn't fun and you have have a business to run, but a few minutes every 3-6 months to check your policy and see if there are any gaps in your coverage shouldn’t be a big inconvenience.
Reason claims won't get paid #2: Not understanding what the policy covers
A lot of freelancers don’t understand what their insurance does and doesn't do. This isn’t your fault. It’s our job as insurers and brokers to present this information in a better way and it’s something we’re working on at With Jack.
Solution: When I was a freelance photographer, I had no idea how insurance would help me. I knew I had worries about my camera equipment breaking or a client being unhappy with my photos and saying I ruined their wedding day (which never happened!).
Not everybody wants or has the time to trawl through pages of policy wording and dismantle the legal terminology. You could write down what concerns you have in your business and ask your insurer how your policy can help in those situations. For example, “I’m worried about cashflow if a client doesn’t pay me”.
If you're currently experiencing any worrying situation and aren’t sure if your insurer can help you, my advice would always be; if in doubt contact your insurer.
Reason claims won't get paid #3: Policy exclusions
All policies have a list of exclusions. You can find out what’s excluded in the policy wording under the ‘what’s not covered’ or ‘exclusions’ section.
A claim for equipment that’s no longer working due to natural wear and tear would be excluded. The item is old and has just stopped working through natural deterioration. Wear and tear is excluded from contents policies because it's an inevitable outcome.
If a laptop is 10 years old and isn’t turning on anymore—and it hasn’t been dropped or had Irn Bru spilt over it—it’s likely to have died due to its age so it wouldn't be covered.
Solution: Be aware of your policies exclusions. Keep equipment well looked after and replace equipment when it's old and unreliable.
Reason claims won't get paid #4: There is no claim… yet
In a blog post titled ‘When should I contact my insurer’, I mentioned speaking to your insurer when there’s a complaint or criticism from a client, or you’ve made a mistake in your work.
Ideally you want to contact your insurer at the earliest inclination there’s something wrong. However, this doesn't necessarily mean the policy will be triggered. It’s too early for the insurer to get involved because there's no claim just yet.
A client may be complaining about how long a project's taking to complete, but they as yet haven’t claimed loss of income, compensation for hiring other freelancers or threatened you with legal action.
There is currently no monetary loss that the insurer can step in and contribute to.
Solution: Contact your insurer as soon as you’re aware of any circumstance which may give rise to a claim. A circumstance may be a complaint or criticism from a client, or a mistake you’ve made in your work.
Be aware, however, that what will trigger the policy is a threat of legal action or monetary claim. Your insurer can provide legal experts to help you, the cost of which will be covered under your insurance.
Reason claims won't get paid #5: The situation happened before the retroactive date
If you’ve been in business for 5 years but you only bought insurance a few months ago, there’s a 4+ year period where you haven’t been protected.
If a freelancer submits a claim for something that happened prior to them being insured it wouldn't be covered. For example, a copyright claim for a logo that was designed 1 year ago—before there was insurance in place.
The reason insurers can keep legal fees affordable is because not every freelancer will have to use their insurance. You’re paying money into a pot each month alongside thousands of other freelancers. When a small number of those freelancers have a legal problem, there’s enough money in the pot to cover the fees and compensation.
If everybody bought insurance only at the point they needed to use it, policies would cost thousands of pounds instead of a couple of hundred pounds.
Solution: Buy insurance as soon as you start trading! If you've been working without insurance ask your insurer about adding a retroactive date so you’re covered for work completed in the past.
To recap, what tips will help you get your claims paid?
- Review your policy regularly to make sure there are no gaps in coverage
- Write down what concerns you have in your business and ask your insurer how your policy can help in those situations
- Be aware of your policy exclusions. For example, wear and tear is excluded so replace equipment when it's old and unreliable
- Contact your insurer as soon as you’re aware of any circumstance which may give rise to a claim, but please note the policy will be triggered when there's a threat of legal action or monetary claim
- Buy insurance as soon as you start trading