A lack of familiarity with the insurance market often leads to avoidable errors when arranging surety insurance.
To minimise these risks, it is generally advisable to seek independent free guidance from a professional insurance broker, rather than relying solely on online comparison platforms. A broker brings market insight and technical expertise that automated tools are rarely able to replicate.
A professional broker will assess the risk in detail and present a range of objectively selected alternatives, tailored to the client’s specific needs and risk profile.
Below are some of the most common and significant mistakes observed in practice:
Treating price as the primary, or sole, decision-making factor when selecting a policy or insurer.
While premium levels are undeniably important, they must be assessed alongside other critical factors, including sum insured, scope of cover, exclusions, waiting periods, and deductibles. It is essential that all these elements are truly comparable across the alternatives presented, and that any differences are clearly understood and appropriately weighed.
Equally important is the insurer’s financial standing and its proven ability to manage claims effectively, factors that are particularly relevant in surety.
Providing incomplete or inaccurate information when the risk is being assessed. As a result, the underwriting analysis carried out may not accurately reflect the true risk exposure. Insured sums, security measures against theft and fire, and the location of the risks, among other factors, have a direct impact on the premium (the cost of the insurance).
Clients must clearly articulate their needs and establish priorities when seeking cover, as these priorities shape the structure of the insurance solution.
For example, when insuring a residential property, priorities may include comprehensive assistance services, extended theft cover, full water damage protection or cover for robbery away from the home.
In this context, it is essential to ensure that policies remain up to date over time. Any change in circumstances that may materially increase or reduce the insured risk must be communicated to the insurer, as failure to do so can affect coverage validity and claims outcomes.
“Let’s see now common misconceptions linked to bank-related insurance requirements connected to mortgage lending:”
Assuming it is mandatory to arrange home insurance through the lending bank. The only legal requirement is that the property securing the mortgage is insured and that the policy includes a mortgagee clause in favour of the lending institution. The choice of insurer remains with the borrower.
The insured sum relating to the buildings element (walls, ceilings, floors, etc.) should not be confused with the outstanding mortgage amount. In a home insurance policy, the buildings sum insured is determined by the property’s square footage and construction quality. In the valuation carried out on the property, this corresponds to the reinstatement or rebuilding value.
When applying for a mortgage, it is NOT a legal requirement to take out a life insurance policy covering the loan amount, although it is always advisable. It is important to note that, should an individual decide to arrange such cover, they are not obliged to do so through the lending bank. Under a life policy providing death benefit cover, the designation of beneficiaries rests with the policyholder, and it is not mandatory to name the lending institution as beneficiary. Beneficiaries may include children, a spouse, or any other chosen individual. Nor should borrowers feel compelled to arrange life insurance for a multi-year term requiring upfront payment of premiums for future years. Annual renewable cover is often available and may provide greater flexibility.
Policy cancellations must be notified in writing to the insurance company at least one month in advance, in accordance with the Insurance Contract Act. Failure to provide timely written notice, and merely returning the premium receipt, gives the insurer the right to claim the premium, which, in many cases, they do.
Finally, it is advisable to request quotations well in advance of the renewal date of the policy to be replaced. Adequate lead time enables proper risk analysis, market engagement and underwriting consideration, all of which are essential to securing appropriate and sustainable cover.