NOT TAKING COVER CAN LEAD TO RUIN FOR SENIOR CITIZENS
Senior citizens on fixed incomes who have been hard hit by the low interest rates of the past two years are reducing and, in some cases, cancelling their short-term insurance to save costs.
But the consequences of dispensing with insurance can be disastrous for pensioners, Debbie Barret, the general marketing manager for First National Bank Insurance Brokers, says.
She says senior citizens may face huge claims to cover their third-party or personal liability exposure, which could ruin them financially. Third-party insurance refers to cover for any claims made by a person other than the person whose property you damage. For example, if you are involved in a car accident where you are at fault, you may be liable for the damage to the other driver’s car, as well as for any injuries sustained by the occupants of the other car.
Third-party insurance is not restricted to car insurance. Personal liability insurance covers you for instances when you may be held personally liable to pay compensation because your negligence or that of a member of your household resulted in accidental damage to someone else’s property or in personal injury or death.
Barret says it is important to be aware of the following if you are considering self-insurance:
Self-insurance is most appropriate for high-net-worth individuals who have cash reserves and the discipline not to spend their emergency funds. “Self-insurance for the average consumer is apt to degenerate over time and become non-existent, leaving you exposed to dire financial risk,” she says.
If you believe that you can make self-insurance work, you should make sure that you have sufficient funds to cover any thirdparty and personal liability claims against you, because such claims can run into millions of rands.
Older people sometimes qualify for reduced premiums, because they constitute a lower risk as a result of their experience and more prudent lifestyles.
You and your broker should regularly review your insurance needs to ensure that you have the appropriate level of cover in place. This applies not only when you have accumulated more possessions but also if you have downsized.
Barret says while disciplined and prudent older people are less exposed to certain risks than are young people, in some respects they are more vulnerable. For example, she says, a younger person who earns a salary may be able to replace his or her losses, whereas a pensioner who relies on a fixed monthly income often lacks the financial resources to make good a major loss.