December is typically marked by big bills as South Africans hit the country’s shopping malls to spend their hard-earned bonuses. Salaries and bonuses tend to be paid out early in December, leaving us feeling flush and thus more reckless when it comes to spending.

There’s a reason many people take financial strain in January. As a result of the longer time between December and January salary payments, many South Africans tend to run out of money before the end of January, and the result is a festive hangover from which it can be hard to recover in the short term.

Missed debit orders not only negatively influence your credit score, but, in the case of insurance, also leave you without cover during a period typically characterised by more road accidents.

So how do your premium payments work and what are the implications if you miss your debit order?

No pay equals no cover
Typically, an insurance policy covers the holder for the period between payment dates. If you miss a payment for a specific period, you will not be covered during that period. Your insurer can choose not to honour a claim for an incident that occurred during that period, or it can cancel your policy (depending on your policy terms and conditions).

Additionally, if your policy is cancelled for non-payment, an insurer may regard you as a high-risk individual, which means it is likely you’ll pay higher premiums for some time to come.

Grace periods aren’t bullet-proof
The Short Term Insurance Act’s Policyholder Protection Rules state that insurers must provide clients with a grace period of no less than 15 days after their initial debit order date before relinquishing cover. However, this concession is not unlimited. For instance, this rule doesn’t apply in the first month of your policy period, so if you’re newly insured, don’t make the mistake of assuming the best.
 
Communication is key
If you know that you won't be able to pay your debit order, the best course of action is to contact your insurer to work out payment terms that best suit your financial needs. In most cases, you’ll be able to work out a grace period, or come to an agreement whereby you pay a pro-rata premium for the additional period for which you need cover.
 
Missing a debit order can have far-reaching consequences. So, before you start swiping your credit card without much thought, consider putting aside enough money to cover all your payments for December and January.

Nthabiseng Moloi is the head of marketing and brand at MiWay insurance company.