InsureExpats.eu

Here are excerpts from a great article that was published in the Canarian Weekly 14th May 2010. It is important for expats to understand the legal implications of  an insurance contract and the correct process of cancellation.

Mr. Smith is phoning around asking for quotes, the day before the renewal date of his car insurance policy. But Mr. Smith doesn’t know that it is already too late. He should have given two months notice to cancel the policy. Don’t think that by cancelling the DD or by not paying the bill, Mr. Smith will get away with it. Probably he will face a judicial process. Read here how you can avoid getting in to trouble and change insurance company in the correct manner.

An insurance policy is a contract. Just like your rental contract or even your work contract. Having that in mind, Insurance is a contractual relationship entered into by the insurer and the insured (you). The Deal is quite simple: on such a contract, commonly called the policy, usually provides that, on payment of the premium, the insurer promises to indemnify and reimburse the insured for any loss incurred by him from certain stated causes. This contract in Spain is ruled by the Law 50/1980, and if you want to cancel your policy you should know the following:

Most people are not aware that they should advise the insurance company 2 months before it is due. This is the Law in Spain, and even if you are not “aware” of the law you are obliged to act accordingly. The Law of Insurance (art. 22 de la Ley 50/1980) says that if you want to cancel your insurance contract, you must send a written letter or fax with a minimum of two months notice. If you don’t do that, Insurance Companies can reclaim in court the payment of the premium. Before the European Economical Crisis, most Insurance Companies didn’t bother to claim unpaid premiums, but nowadays, as sales are decreasing and costs are getting higher, Insurance Companies are coming back to claim unpaid premiums, specifically if they are more than 300€/a year. And Insurance Companies have nothing to lose: when they take you to court, if they win, you are entitled to pay your premium, the cost of their lawyer (and yours) and the costs of the judicial process. The Insurance Company will win, because they are acting accordingly to the law.

Bad Bank or Good Bank?

One of the reasons why Insurance Companies are getting back to claim unpaid premiums from their clients is mainly due to bad banking practices in Spain. Banks can’t give anymore mortgages so they are looking for other ways of income. So Bank directors are pressuring their employees (who normally have no clue about insurance) to sell insurance to their clients, no matter how. Bad banking practices include all sorts of schemes: from breaking data protection, getting inside your account, checking when your insurance is running out and calling you before the renewal to give you a more “tentative” price, or worse, to return your direct debit on purpose, so that they can place their insurance product on you. In the last year we have seen how Banks in Spain are returning massive stocks of insurance receipts without the permission of their clients. So Insurance Companies to avoid this “Old-west Scenario” are getting back to claim their rights in court.

How it Works

So the policy, as a contract, must contain all of the elements necessary for a valid contract. The mutual considerations here are the premium paid by the insured and the promise of coverage made by the insurance company.

The causes of damage as provided for in the policy are also called “risks”. The company specifically stipulates those risks which are covered under the particular policy. Any risk that is not stated shall not be included. A policy must have a subject which is to be insured. It may be the life of a designated person, a house, your car, etc. The risk or peril against which the life or property is to be insured must be specified in the policy: the death of a person, liability resulting from the negligent operation of an automobile, etc.

The amount for which the policy covers the loss must be indicated. The insurance taker is the holder of the policy. Normally the term during which the policy will be in effect is 1 year, after which it is renewed automatically unless you decide not to renew it, in which case you should previously advise the insurance company 2 months before it is due.

An insurance company may cancel an insurance policy only under the following circumstances: If the insured has lied or made false statements on his/her application or in a claim he/she submitted; If the peril covered is increased. In these cases when there is no good faith, the insurance company shall pay the difference between the premium agreed and the premium which should have been paid for the increase of the risk; if the insured object is sold.

Failure to pay premiums when they fall due, there is a 30-day grace period available to the insured to give him an opportunity to pay the premium without affecting his rights under the policy.

Great post on business insurance by Pablo Guerrero Santibañez, Expatriate Business Director, Caser Seguros.

“In Spain there are over 3.5 million businesses. 90% of them can be categorized as small business with less than 10 employees. As you probably could guess, almost 50% of the insured businesses in Spain are bars and restaurants, followed by grocery stores.

Each year, 10% of the total businesses in Spain are brand new start-ups. However, 8% of the total figure shut down. The reasons are many, but shutting down because you didn’t have the right insurance shouldn’t be the case.

Insuring a business is not a hard task if you count with an insurance professional on your side that can assess you about the best coverage that your business requires.

In Spain, almost 90% of the business insurance policies are distributed through agents and brokers. Business owners really need someone with day-to-day experience and knowledge in the field. We are talking about insuring in many cases, the source of income of a family.

A common error of inexperienced and sales-starving assessors is to recommend a policy based only in price. It’s what in Spain is called “Pan para hoy, y hambre para mañana”. It might look like a good deal now but it will cost you more than what you think in the future when an unexpected event occurs.

As a business owner you should know what can be covered by an insurance policy. It might sound obvious, but in many cases the surprise comes when you realize that the insurance company doesn’t cover it or to the extent that you assume it would.

So, previous to issuing a business insurance policy take the following aspects into consideration: coverage, premium, service, insurance professional and company.

Don’t forget how much it cost you to get what you have when you decide to get just basic coverage on a policy or include optional coverage that for sure won’t do more than to help you in the future. So, it’s important to speak to your insurance professional so you understand the minimum coverage that you should have. In this category we have business property coverage, which will protect your business assets. It will limit your liability and can cover different type of losses such as damage from fires, electrical surges, or can even include other services such as legal defense.

But don’t forget that each business is different than the rest. It’s important to analyze your present and future business needs so you can add optional coverage depending on what you want.

For example, what would happen if you were paralyzed for 4 months because of water damage in your business? Could you continue with a normal life? Not being covered for the unexpected can be devastating to your life and business.

In many cases, insurance companies will benefit cautious business owners by lowering their premium if they have security measures like alarms, smoke detectors, deadbolt locks, fire extinguishers, and others. Some of these measures are not expensive and will help you sleep well at night and might even save you up some money.

People assume that theft should be a basic coverage in business insurance, but in many companies it isn’t. It’s not a problem if you know about it and you contract it as an additional coverage. The problem occurs when you didn’t read or know about it. Other examples are water and glass damages.

In Spain water and glass damages cause the higher rate of claims to insurance companies. Theft, having less claims, accumulates the most expensive claims of all. So, if you are not covered for events like the ones mentioned you should reissue your policy in order to include them. You can and should update your policy at any time that your business suffers a change (new machinery,…). Including or excluding information will vary the premium but like in any other aspect of life, lying doesn’t help at all.

It’s not only important to check if you are covered but to understand the economical limits that some companies apply. For example, if you have some sort of machinery in your business and each costs over 50.000 euros, you should check if you have an economical limit in the coverage of machinery breakdown. Imagine that one machine breaks down and a new one costs you 60.000 euros. The sad part is that it can happen if you don’t know what you have contracted.

So at this point, you probably are starting to think where you can find the best policy in the market. Once again, don’t forget that usually cheap things are never good and good things are never cheap. The average premium for business insurance is 450 euros. This doesn’t mean that if you are paying 800 euros you are overpaying. Remember that each business is different and not all policies cover the same.

If protecting your business from risks is your priority: search for good, solid, and experienced insurance companies that probably will have highly qualified professionals that can guide you so you can make the best decision for you and your business. Also, act as you would do with other common things in life: ask your acquaintances, peers or members of associations that you might belong to.

Contracting the right business insurance could be one of the most important decisions in your life.”

For more information click here.