“Mind the gap”

I do not mean the “mind the gap” warnings you see at London train stations. We are talking insurance here. Insurance is like a relay race; where the scope of coverage of one policy ends, the scope of coverage of another begins. One policy’s exception is another’s insurable peril. Unfortunately, once some policyholders purchase a policy, they think it is all encompassing until they suffer a loss and they are told that the loss is not covered. This is very common with all-risk insurance policies. After all, the name says “all-risk.” But even “all-risk” policies have limits, they have exceptions. Nothing is boundless in this life except God. People also misconstrue other policies like comprehensive motor covers and goods in transit insurance. Today, we want to look at some of these policies where you especially need to “mind the gap,” that is, look out for the lacunas, the limits and the exceptions. But if it is too much hassle, as I know it would be, get a Registered Insurance Broker (RIB) to be your agent, guide, watchdog and adviser. It is at no extra cost; absolutely free.

Even if you are engaging an RIB, we are still going to examine the policies because knowledge is power. The first of these policies is Goods-in-Transit policy (GIT) which protects the goods of the policyholder against fire, theft or accidental damage while the goods are being loaded or unloaded, as well as, while the goods are in transit or whilst temporarily warehoused within the general course of transit. GIT is example of an all-risk policy and the cover commences immediately the goods are being loaded on to the transit vehicle and lasts until the goods are unloaded at the final destination. However you have restricted GIT policy which only covers losses following an accident, collision or over-turning of the conveying vehicle.

You will notice that the all-risk GIT is entirely about the goods, until they are offloaded. Therefore, a fire and special perils policy should be in place at the warehouse or premises where the goods are being stored to take over the protection of the goods once unloading is completed because the GIT terminates at that point. But what about the people: employees and third parties? They are exposed to risks of injuries and death while carrying the goods or whilst they are in the premises where the goods are, while the goods are in transit and when they get to their final destination. A group personal accident cover will take care of employees, while a public liability policy will take care of third parties for bodily injuries, death and property damage. Motor (Third Party) Insurance, on the other hand, will take care of third party bodily injuries, death and property damage while the goods are in transit by road.

You will also notice that no form of theft is entertained in the restricted GIT cover and even in the all-risk cover, there is a disappearance clause. It simply means that if the good are stolen and your driver (with other employees) is responsible, you are not entitled to indemnity. In other words, the theft cover does not include your employees. So how do you “mind this gap?” This is where Fidelity Guarantee Insurance comes in. Fidelity Guarantee Insurance is designed to provide cover for the policy holder  against any financial loss sustained as a result of fraud, dishonest acts, theft and forgery, among others, committed by the employees in the course of their occupation or duties. Please note that Fidelity Guarantee Insurance does not guarantee the fidelity or honesty of the employees; it only states that if the policy holder suffers loses as result of the infidelity of his employees as specified in the policy, he will be indemnified in line with the provisions of the policy. Some insurance companies also grant extension (loading) to delete the disappearance clause or make it inoperative.

Also, every comprehensive Motor Insurance policy carries a Fidelity Guarantee Exclusion Clause. The implication is that if the driver of the insured or domestic staff absconds with the policy holder’s vehicle; he has no recourse to compensation from his insurers because infidelity of employees is an excluded peril. The solution to this lacuna is a Fidelity Guarantee Insurance or the policy holder can purchase a combined comprehensive motor /fidelity guarantee insurance.

The major distinguishing feature between all-risk covers and other insurances is that all-risks insurances cover loss arising from any fortuitous cause except those that are specifically excluded. This is in contrast to other insurances where the perils that are covered are named. Only losses proximately caused by the named perils are covered. As a result of the misconception of the phrase “all-risk insurance,” it is no longer commonly used in insurance policies in some countries because of concern that the phrase «all-risk» mean a wider scope than is actually covered. Instead they now use the terms «open perils» or «special perils» instead of «all-risks.» But the Nigerian market continues to use the term “all-risk.” But I have no doubt that your registered insurance broker will take time to explain the scope of coverage of the insurance you are buying. Beyond that common sense will tell a potential insured that no insurance policy is open-ended or all-in-all. At the end the difference between named perils and all-risk really is that in named perils, the perils covered are specially spelt out. In all-risk, the focus is in what is not covered. Need I add that all-risk policies are relatively more expensive because of the wider scope of cover?