South Africans today find themselves in a time of economic instability.
Rapidly increasing interest rates and cost-of-living expenses are placing immense pressure on already struggling consumers.
However, reducing your insurance cover or cancelling your policy to improve cash flow may seem cost-effective now, but not when the time comes that you need to claim.
This is the opinion of Karen Rimmer, head of distribution at PSG Insure, who shares five steps to safeguarding yourself against financial losses.
A significant business or personal loss without insurance cover could be detrimental to your financial future and could compromise your ability to recover financially.
1. Ensure your home cover is sufficient
“You may think that simply having insurance offers you enough protection. The reality is that your level of cover might be insufficient – and when an unforeseen disaster such as a fire strikes, submitting a claim only to find that you aren’t fully covered, or having your claim repudiated, can be financially and emotionally devastating,” says Rimmer.
Be sure to consider all relevant risks, and to allocate the necessary budget to adequately cover your home.
“Adequate home insurance through a well-established, reputable insurer is crucial,” says Rimmer.
When it comes to insuring your property, make sure you are covered at the current building costs per square metre, and make provision for any outside extras such as your paving or swimming pool.
2. Accurately valuing household contents is important
Any household item you bought this time last year is likely to cost more today.
“So, having insured it at last year’s purchase price, you won’t be able to replace it at today’s cost if it is damaged or stolen and you are solely reliant on your insurance claim,” says Rimmer.
Unfortunately, many South Africans tend to overlook the fact that assets covered under a household contents policy need to be insured for their current replacement value – and not for the amount they cost you when you bought them. This highlights the importance of revising your sum insured on an annual basis to keep up with inflation and other increasing costs.
3. The importance of adequate car insurance
To avoid placing yourself in financial distress, it is essential you have adequate car insurance in place. Your policy should provide cover if you were negligent and caused an accident, as the other party would be able to hold you liable for any damages to their vehicle, as well as medical costs.
“A situation like this can easily cause financial ruin if you are not adequately insured. Given the high rate of accidents in South Africa, not having the right vehicle cover is simply not a risk that anyone can afford to take,” says Rimmer.
Another way to avoid financial strain is to ensure that any expensive items that you keep in your vehicle, such as your laptop, tablets or cell phone, are covered under an all-risk policy and are always concealed in an enclosed storage area, such as the cubbyhole or boot. With some laptops and cell phones costing from R10 000 to R20 000, this cover could help you recover financially from a smash-and-grab or hijacking incident. It’s important to note that these items must not be in clear view, whether you are driving or the vehicle is parked. Failing to meet this requirement could result in your devices not being covered when it comes time to a claim.
The recent surge in car theft and hijacking has led to insurance companies placing an increasing responsibility on vehicle owners to install tracker devices on their cars or motorbikes. It is becoming imperative that insured parties are able to prove they have taken reasonable precautions to prevent avoidable losses. If policy owners are shown to have been negligent, insurers can repudiate claims based on the insured’s breach of a contractual duty of care.
4. Keep your personal cover updated
If you’ve changed jobs or recently purchased a big-ticket item, it’s critical you inform your adviser as soon as possible on any significant changes in your circumstances. This would also include letting them know about a different regular driver of your vehicle, or specifying an expensive item. Rimmer explains that although your insurance cover is not the first thing you’ll be thinking of during these moments of excitement, neglecting to update your adviser on these changes could have costly implications for you in future.
5. Remember your responsibilities
Lastly, as Rimmer concludes: “You have an obligation to your insurance adviser to provide correct information for your insurance cover. Disclose all relevant details and make sure you provide accurate estimations pertaining to the value of your assets. If you are not confident in verifying this information, many insurers can assist by sending appraisers to value your insurable property or goods.”
Your adviser will review your policy annually to make sure it is still accurate and complete. However, you need to be sure you provide any updates and account for the impact of the economy. By doing so and working with your adviser, you can rest assured that your personal interests are well protected.
* The views expressed do not necessarily reflect the views of IOL or its sister publications