We have all heard of “legal speak” and “doctors’ jargon,” which nobody understands. The National Insurance Institute (INS) has invented its own “insurance speak” and interprets common terms in a particular way, so I thought I’d provide a translation of some into plain English.
Appraisal (avalúo). In the case of automobile insurance claims, damage to cars must be appraised by INS, usually at its appraisal center, known as “Avalúos,” in the southeastern San José district of Zapote. Buildings should be insured for the estimated rebuild cost, and for this most people automatically think of a formal appraisal.
Appraisers normally charge a percentage of the value they come up with – an invitation for inflated appraisals. So the normal procedure is for people to eschew formal appraisals and ask their friendly builder for an indication of “how much this type of construction costs nowadays” per square meter or foot, and then multiply by the dimensions of the building.
Binders. In insurance jargon, this means you can call up your insurance agent and tell him you have acquired, for example, a new car, license plate 123456, and as of that moment he “binds” the car – meaning if anything happens to it, the insurance company is “bound” to pay a claim.
There are no binders in Costa Rica. The word doesn’t even exist in Spanish. For insurance to come into effect: 1) a form must be signed by the applicant; 2) the item (building, vehicle, boat, etc.) must be eyeballed and photographed by a representative of INS, usually the agent; and 3) the premium must be paid.
Blue Book. For about three years, INS had a “Blue Book,” i.e., a catalogue of values of vehicles for insurance purposes. It was incomplete, and often inaccurate. INS eliminated it in January, so now it is up to the owner to determine the market value of his or her car for insurance purposes.
Circulation permit (marchamo). This is a windshield sticker that shows the vehicle’s annual ownership and road taxes have been paid. Payable at the end of the year, marchamo quotas include obligatory auto insurance premiums.
Enabling license (licencia habilitante). Payment of automobile insurance claims is conditional on the driver having an “enabling” license at the time of an accident. This means a license that is in force, and for the type of vehicle being driven. Foreign or international licenses are recognized for 90 days as of when the holder last entered Costa Rica.
Grace period (período de gracia). This is the time frame, after the expiry date of a policy, in which INS will receive payment of the premium and renew the policy with no further paperwork. Policies with 12-month terms get 20 working days’ grace, semiannual policies get 10 days and quarterly policies get five. Monthly policies have no grace periods – but they are usually based on payroll deductions.
Insured value (monto asegurado). You should base the value at which you insure your things on how much it would cost to replace or repair them, if there were a claim. Often, people try to insure their houses for the purchase price they paid, which, obviously, is wrong, because they paid for land, view, location, etc., and these are non-insurable.
In the case of cars, people tend to try to overstate the value by alleging that their particular vehicle is the best of its genre in Costa Rica. But human nature being what it is, as everyone tells INS the same tale, it disbelieves all such allegations and pays claims based on whichever is lower: the insured value or the market value of similar vehicles in average condition.
Sometimes people want to overstate values so that, if there were a claim, they would receive payment for the total cost of repair or replacement, net – without the effect of deductibles. Example: if my widget is worth 100 and the deductible is going to be 20%, I’ll insure it for 125 so that, if I claim, I’ll get 100 net from INS. That’s a neat way to pay too much premium.
Liability insurance (responsabilidad civil). INS pays claims when the policyholder has been found guilty, by a Costa Rican court of law, of having caused a loss to the claimant.
Named insured (asegurado nombrado). In general, insurance policies covering “things” (tangible items such as cars, buildings, boats, etc.) should be in the name of the registered owner. If the “thing” is owned through a corporation, the policy should be in the name of the corporation – not of any of the shareholders thereof. Auto policies should be in the name of the registered owner of the car –not in the name of the driver.
Obligatory auto insurance (seguro obligatorio de automóviles, or SOA). This is insurance only in name, as the amount of coverage is grossly insufficient. It covers injury or death to third parties – no property damage. The premium is paid at the end of every year, tacked onto the marchamo (see separate entry).
Proximate cause (causa próxima). This is the ultimate cause of a disaster. Example: the proximate cause of a tsunami is an earthquake under the ocean. So if your seaside home has earthquake coverage and a tsunami hits, relax and enjoy the swim; INS will pay for the damage to the villa.
Reinstatement (rehabilitación). INS allows reinstatement of life, theft, fire and a few other minor policies, but expressly forbids reinstatement of automobile and medical policies.
Social Security System (Caja). This is the organization that provides medical care needed as a result of sickness or childbirth to those who pay a monthly quota. It is exclusively for Costa Ricans or legal residents. Employers have the obligation to enroll their employees.
Vandalism (vandalismo). Often, people say, “Vandals broke into my house and stole the TV.” Wrong: it was a thief who stole the TV, not a vandal. Vandals are people who have some mental kink, quirk or axe to grind, and derive pleasure from destroying other people’s property. The home fire and natural disaster policy covers vandalism, but not theft.
Workers’ compensation (riesgos del trabajo). Costa Rican law states that every employer must provide his or her employees with workers’ compensation insurance, which covers work-related accidents.
