Why consistent cover costs less
It has been a difficult time under lockdown, though more painful for some than others. For many, income has been reduced or has ceased altogether, putting pressure on savings and increasing the need to go into debt. Although we’re slowly returning to a ‘new normal’, some bills or debit orders may seem like a luxury you can ill-afford at a time when many of us are still dealing with the consequences of a reduced income.
When it comes to your short-term insurance, it can be difficult to see the value until you need to claim, but without it, a claim could cripple any remaining financial resources. Imagine, for example, if your business premises you finished paying off a year ago burnt down, but you had reduced the sum insured because there is less activity on the site under lockdown? All your hard work paying off the property would quite literally go up in smoke.
Many of us will be paying off property and other assets, so some insurance will be required, but other elements of cover can be cut to reduce the overall costs, or some insurance may seem less essential these days. It’s a fine line, however, and one best navigated with the assistance of your adviser. Cheap cover can lead to expensive consequences, especially if not handled with care, so if you are able to keep as much of your cover in place as possible, it’s likely to be the better bet.
But what if you can’t pay?
You need to communicate what financial issues you are facing, or else an unpaid premium can end up costing you so much more if your cover comes up short. Not paying for your cover will mean it will cease to exist, but many insurers are open to assessing delayed payments or reductions on a case-by-case basis (and have put some relief in place for clients already). But if you don’t communicate what you need, no one can help you to prevent any unnecessary issues before they happen.
How could you reduce your cover?
An example of a safe way to reduce the cost of your contents cover would be to remove specified items like laptops or tablets, even cell phones, that you would ordinarily take out of the house with you. If you remain at home, this is safe to do and can significantly reduce your monthly premium, but keep in mind that the true replacement value of these items must be worked into your general contents’ total sum insured. This should reflect the collective value of everything in your home.
While many of us remain at home, it’s a great time to get acquainted with what it might cost to replace everything you own. Take the time to get a sense of what a new couch, fridge or dishwasher would cost by shopping around online. Don’t forget clothes, music collections, keepsakes and electronic equipment. Each of us has a variety of treasures, so guessing or taking the standard contents suggested by your insurer is unlikely to be enough. Tally up what you own and how much it would cost to replace everything – it’s the only way to ensure you have enough cover (and don’t, by chance, have too much).
Staying on track
As life resumes, it’s essential to remember to reinstate the cover you removed. For example, many people have reduced car cover because they have been driving around less, but this would need to be reversed to ensure you have enough protection when out and about on the roads again.
For business owners, there are varying levels of risk, depending on the industry you are in. Keeping cover in place for stock that can’t be sold, and cover against looting or fire are among the essentials that act as a protective financial barrier. Your adviser can guide you on the risks to consider.
Consistency can be cheaper
Unfortunately, if cover is cancelled, reinstating cover at a later stage may be more costly. The risks, or prices of equipment, may change. This would impact the cost for insurers and, consequently, premiums.
Your short-term insurance will stand you in good stead when you need to claim. We encourage you to keep your safety net intact, as it can make all the difference in a difficult economy, which could be volatile for some time.
Bertus Visser is the Chief Executive of Distribution at PSG Insure