Why you cannot make profit from your insurance policy

The insured or a person that has taken an insurance policy is not expected to make profit or gain extra 10 kobo from the insurance policy he or she has taken whenever loss occurs. If it happens, either by omission or commission, then the person would have cheated on other insureds who have taken similar insurance policies with him.

This is because insurance is a pool of funds contributed by a large number of people from where any member of the pool who suffers loss is reinstated to normal position before the loss, so no one is expected to make extra gain from the pool.

Insurance therefore is about bringing you to the position you were before the loss and not to put you at a position higher than you were.

Like an experts puts it, “insurance is not a ‘Father Christmas’ but its there to give you succour at the event of loss, so that the insured can go on with life un-hampered.”

This act of trying to make profit is seen as attempting to defraud an insurance company and can lead to forfeiture of claim.

How does this happen and how can you avoid your insurer thinking you want to make profit from your insurance policy?

Know that an item is not insured twice. For example, taking two insurance policies for the same vehicle, machinery or building at the same time from different insurance companies, is illegal.

If this happens, though you may have paid premium in two places, you are only entitled to make one claim. And the claim, if known by the two insurance companies, are shared according to the level of risk carried.

So, you would be losing by insuring the same risk (property) at the same time with two or more different insurers. This is not the same with life, as it is said that life has no limit; meaning you can insure your life up to any value you want.

Another way this can happen is when there is a loss of maybe a vehicle as well, and the insured rushes to go and fix it up and come up with a claim for the insurance company. At this point, you have shot yourself in the foot, for not carrying the insurance company along at the event of the loss before embarking on the repairs.

Here, the insurer has the right to refuse the amount you claim to have spent on the repairs, and may decide to offer what it thinks is appropriate which of course may not be satisfactory to the insured (you). Don’t create such gap, it can be frustrating.

What should you have done? In the event of an incident leading to loss, call your insurer for an “on-the-spot assessment”. The insurer takes record of the incident, and from that point begins the process of paying the claim to bring the insured back to the position he was before the incident.

Adeyemo Damola, a professional broker with Boff & Company, said taking an insurance policy is a serious business that requires taking steps in claims processing as prescribed.

Damola said that in the event of a loss, the first thing for the insured to do is to notify the insurer in the quickest possible time, to enable it do an on-the-spot assessment as this is necessary to be able to appreciate the state of loss.

According to him, the first disagreement on claims starts when this first procedure is ignored by the insured. After this stage, completion of claims form and documentation can be carried out and claims process continues from there, Damola said.

Roland Amoyinfa, a broker, said there must be sincerity by all parties in the contract of insurance, a practice he describes as principle of utmost good faith.

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