Prudent Uninsured is a legal concept.
Do you know that as a policyholder, you have an obligation to act as a Prudent Uninsured?
So what does “Prudent Uninsured” mean?
The term Prudent Uninsured simply means that the policyholder should act as if they do not have insurance.
If you have an insurance policy in force to cover you for loss or damage, this does not mean you can be reckless or act with flagrant disregard to the potential risk. In terms of travel insurance, it means you should take reasonable measures to safeguard your property from loss or damage. It also means that if your property is lost or stolen, you should make reasonable effort to recover it. In terms of your personal safety, you should take care to protect yourself from injury or illness and not expose yourself to unnecessary danger.
If you suffer a loss and do not act as a Prudent Uninsured, you could prejudice your position when it comes to making a claim.
Lets take a look at a few examples where a travel insurance provider may question if the policyholder has acted as a Prudent Uninsured.
Reasonable precautions
It is a condition of travel insurance policies that the policyholder should take all reasonable precautions to safeguard their property from loss, theft or damage. That is, to act as if you do not have insurance in place to cover your possessions from loss, theft or damage.
An example of where an insurer may consider you have not acted as a Prudent Uninsured is if you leave your possessions unattended in a public place. This could include leaving your camera on the beach while swimming or leaving your phone on a restaurant table while you are serving yourself food at the buffet.
Loss minimisation
Acting as a Prudent Uninsured includes taking steps to reduce the financial implications of a loss.
Trying to recover lost or stolen items is one way in which the policyholder can attempt to reduce the claim value.
Similarly, if you need to claim out-of-pocket expenses, acting as Prudent Uninsured would be trying to be as economical as possible. For instance, if you missed your flight and need to incur the cost of additional accommodation and airfares, you should do so in the same travel class as you had originally booked to travel. If you had been staying in a hostel and travelling in Economy Class, your insurer would expect you to travel in comparable style if possible. If you decided to upgrade yourself to Business Class and five-star accommodation because you intend to claim reimbursement of the costs from your insurer, it may be that the claim is limited to what would have been comparable to your original travel arrangements (and not the upgraded travel you arranged because these costs are claimable under the policy).
Reckless behaviour / exposure to danger
Just because you’re on holiday and have travel insurance does not mean you should consider undertaking risky activities or act in a reckless manner. Whilst everyone lets their hair down on holiday, you still need to be responsible for your safety and wellbeing. If you wouldn’t do something at home while you are not insured, it’s probably not a good idea to do it while you’re travelling. Before engaging in anything risky, ask yourself – “would I do this at home?”. If the answer is no, then it’s probably not a good idea.
The concept of Prudent Uninsured extends beyond these examples but it is worth bearing in mind next time you’re travelling. If you act as a reasonable person in the circumstances would and take steps to reduce the prospect of a loss occurring, this shows good faith. Also if you do suffer a loss, proceeding on the most economical basis to minimise the claim will be appreciated by your insurer but also ensure you don’t prejudice your position when the time comes to make a claim for costs incurred.
Got questions? Why not call us on 1300 819 888 or send us an email to info@goinsurance.com.au