Etienne du Toit
John Mill, head: Momentum Financial Planning, says financial planning is a key to financial wellness. “Sometimes it is not simply about selling policies, but rather supporting clients to plan better and become more financially literate. This will increase financial stability beyond where we are today, and create a whole new market as well.
‘’Although the solutions we offer serve a particular need it is evident that the journey towards financial wellness does require more. Clients need a proper financial plan and they need to engage with it on a regular basis, and the more financial literate they become, the better decisions they will make regarding their financial affairs. This has created an increased demand for well-qualified financial advisors.”
When deciding on what type of cover suits you best, it’s best to speak to a financial advisor first, and then consider your budget and what type of insurance you need. No one size fits all — you need to consider your needs, your budget and take a holistic approach, rather than just signing up for an insurance policy that might not suit you or your budget.
Momentum advises that while it’s important to get your personal insurance requirements in ordernow, it is equally important to ensure they remain up-to-date and relevant as your life changes.Getting married, having children and buying your first home are all factorsthat increase your financial responsibilities, so you’ll need to review yourcover as your situation changes.
In addition to the type and level of personal insurance, it is important to ensureyour cover is structured correctly. You may want to have insurance paidstraight from your superannuation fund, or own your insurance personally,so the premiums you pay can be claimed as a tax deduction.
The importance of short-term insurance
The 2016 Momentum/Unisa Household Financial Wellness Index reveals that 41.7% of financially exposed households do not have the means to pay R20 000 for an unforeseen emergency expense. Coupled with this finding is the reality that only 13.6% of the surveyed financially exposed households are satisfied with their debt position.
In an economy where consumers are under pressure to service debt, insurance cover for valuables such as a car and home is often treated as a non-essential item, presenting an even greater threat to the financial wellbeing of over-indebted consumers.
Etienne du Toit, chief commercial officer at Momentum Short-term Insurance, says: “In an environment where consumers are increasingly under economic pressure, it is important to create awareness around the importance of car, home and personal belongings insurance for their financial wellness. For many consumers, paying money each month to protect against events or accidents that might not even happen is not a priority, but this is a risky perspective as the financial consequences of not being insured can be devastating.”
To explain the effects, Du Toit states that if the market value of your car is R200 000, and it is damaged beyond repair, you would need the equivalent of that amount to replace it with the same model if uninsured. “You would be in a worse position if the accident involved other road users, as you would be liable for third-party damage. Therefore, making provision for the right insurance can help you realise your long-term goals, as it protects your assets and safeguards against enormous debt.”
“The same applies for house or property damage. Borrowing money to pay for repair or replacement costs places a financial burden on consumers. Although some home contents hold sentimental value which can’t be replaced, short-term insurance can protect the lifestyle you and your family are accustomed to,” he adds.
Du Toit shares the following consumer tips to help clients make better decisions when considering short-term insurance cover:
- Add insurance cover to your shopping list when buying a car or home:There are a number of tools and calculators available to help consumers determine the affordability of their homes or favourite car models. It is important to consider available options for short-term insurance at this stage of the purchase process to obtain an estimate of the premium you are likely to pay to insure the asset.
- Look for innovative solutions:Short-term industry players are introducing new solutions to interact with clients. It is advisable to compare what is available in the market and select an insurer that innovates to advance the financial position of clients, improve their safety and bring them greater convenience.
- Select an insurer that is proven to pay claims:The Ombudsman for Short-Term Insurance publishes an annual industry review that reveals overturn ratios of insurance providers. The overturn ratio is an important indicator of how well an insurer treats clients at claim stage. Cases that are referred to the ombudsman and ruled in favour of clients are reported on — the lower the overturn rate, the more reasonable the insurer is when dealing with client claims.