
Many contracts you sign and agree to can limit your rights or make you responsible for someone else’s losses or damage. These can also impact your insurance policy and result in a reduction in the amount of your claim or even result in your insurer not paying any of the claim amount.
We look at two of the main clauses you need to look out for and why they can have a significant impact on your insurance coverage.
Contract Clauses to watch out for.
The two main types of contract clauses of concern to you and your insurer are:
- Waiver Subrogation; and
- Hold harmless.
Before entering into a contract that includes these clauses, you should speak with your insurance adviser, who can let you know if your insurer needs to agree to the clause or if it is covered under the existing terms and conditions. Many insurers won’t provide insurance cover, if these clauses are agreed.
Waiver Subrogation
Insurers pay claims for loss or damage and may then seek to recover the amount they paid to settle your claim from the person/ company that caused the loss or damage, unless it’s family or an employee. This is allowed by law, and policies have a Subrogation clause.
If you agree to a clause saying you won’t seek recovery from the person or company that caused the loss or damage and your insurer cannot recover the claim amount, they can reduce the amount they pay for the claim.
This may result in your insurer only paying part of the claim or, at worst, not paying any amount.
Hold Harmless
This type of clause has the effect that you take on all legal responsibility for another person or company, even if they caused the loss or damage.
However, your insurer only covers you for legal costs and your loss or damage. So, agreeing to a contract with a Hold Harmless clause can result in your insurer only paying part of the claim or at worst, not paying any part of the claim.
Therefore, it’s again essential that you review all contract clauses before you sign the contract and let your insurance adviser know of these clauses so they can be discussed with the insurer to get their acceptance and noted in your insurance policy.
What to do.
If in doubt talk to your adviser before agreeing to a clause. They can provide advice and speak with the insurer if needed to ensure that cover remains in place.
General Advice Warning
This communication including any weblinks or attachments is for information purposes only. It is not a recommendation or opinion, your personal or individual objectives, financial situation or needs have not been taken into account. This communication is not intended to be a constitute personal advice. We strongly recommend that you consider the suitability of this information, in respect of your own personal objectives, financial situation and needs before acting on it. This document is also not a Product Disclosure Statement (PDS) or a policy wording, nor is it a summary of a particular product’s features or terms of any insurance product. If you are interested in discussing this information or acquiring an insurance product, you should contact your insurance adviser to obtain and carefully consider any relevant PDS or policy wording before deciding whether to purchase any insurance product.