International poet Ko Un at the 2013 dancing in other words Spier Poetry Festival.
Consumers may be reluctant to opt for short-term insurance, due to the added financial burden of monthly premiums that have to be paid to an insurance company.
But no two short-term policies are the same, and the best way to structure your policy is to use an independent insurance broker, says financial consultant Craig Pogir. “The broker will assist in ensuring that you have the most competitive premium, with the widest cover,” he says.
According to financial planner Frank Magwegwe, who is also the head of Momentum personal adviser services, there are various ways to save on premiums, for both household contents and car insurance.
One way is to increase the voluntary excess amount on a short-term insurance policy, he says. “Increasing the voluntary excess amount on a short-term insurance policy will result in lower insurance premiums,” he explains. “Voluntary excess is the amount of money paid by the policyholder towards a loss before an insurance company pays a claim, according to the terms of a policy. The higher the voluntary excess, the more money can be saved on insurance premiums,” he says. “However, it is important for the policyholder to ensure they are able to afford the excess amount in the event of a claim,” he cautions.
Magwegwe also recommends that families check whether a combined car and household policy costs less than individual car and household policies.
“Most short-term insurance companies that offer household and car insurance policies will offer reduced insurance premiums if two or more of its insurance policy products are used,” he says.
In most cases insurance companies will also provide a discount on a premium when the car or home security exceeds the minimum requirements stipulated, Magwegwe says.
“But it is important for the policyholder to understand that there are upfront costs for installing additional security measures.”
Conducting a yearly valuation of motor vehicles and household contents insured at the time of renewal of the short-term insurance policies can also result in reduced premiums, due to the fact that the value of motor vehicles and household contents typically depreciate on a yearly basis, says Magwegwe.
Donald Kau, head of corporate affairs at Santam, points out that although insurance companies do adjust the values at the renewal date, it is still the responsibility of the client to ensure that the values are correct.
“Revisit your motor vehicle premium annually,” he advises. “Check the insured amount for motor vehicles as they depreciate. A car that was bought for R200?000 — and originally insured for this amount — would be worth, say, R120?000 five years later.”
Read the fine print
He also recommends reading your insurance policy. “Make sure you understand the terms and conditions and keep this schedule updated. Most insurers reissue a policy schedule annually.
“Check the information and the details of your cover, and make sure you are not paying for insurance that you don’t need.”
Common pitfalls to avoid when structuring short term insurance, says Gerald van Wyk, head of intermediary support at Discovery Insure, include:
Insuring incorrectly: Under-insurance remains a major problem and it is estimated that more than 30% of consumers are underinsured. In choosing the right cover levels it is important to consider all your assets to determine the full extent of your requirements.
A common mistake that consumers make is to insure their assets against their market value (the cost of buying an item) and not the replacement value.
You could for instance have bought a cellphone two years ago for R7?000, but in the event of it being damaged today, it could easily cost R10?000 to replace with a similar model.
It is thus important to insure your household contents, domestic buildings, and portable possessions against their replacement value.
Inadequate cover
Clients often don’t insure against all the perils that are part of normal life. So while household content cover will provide you with cover in and around your home, when you are away from your home you will require portable possession cover in the event of a loss.
This type of cover is generally inexpensive, but many consumers either decline or neglect to select the cover. Consider for instance the value of items typically contained in your gym bag (trainers, tracksuit, media player, and the like) and imagine losing your bag and not having adequate insurance cover to replace these items.
Not understanding the terms and conditions of your policy: Another important consideration when structuring your insurance needs is to understand the conditions under which cover is provided. Not all insurance policies are equal, and though they normally offer similar cover for main insurance risks (fire, accident, theft) they differ in their excess structure, benefits, benefit limits, exclusions and service features.