Cutting back on insurance can backfire
You need to be wise and not trim too much
The rising cost of living and the need to save should not lead to consumers cutting back on their insurance products, experts have cautioned.
“There are a number of ways to cut your insurance costs and save a little extra month to month, but you need to be wise about how you tackle this. For example, reviewing the specified items listed in the all-risk section of your home contents policy and removing pieces that are no longer relevant is a great start,” said Karen Rimmer, head of distribution at PSG Insure.
“However, you should always consider what is essential, what you could possibly do without, and be careful not to cut too much. You do not want to find yourself in an under-insured position down the line.”
Rimmer advises that the three essentials of short-term insurance should always be observed.
• First and foremost is home insurance. Your home is the most valuable asset you’ll ever own, and a catastrophic event such as a fire could ruin you financially if you are not adequately insured. This is definitely not an area for shortcuts.
• Household contents. Many people overlook the fact that your household contents need to be insured for their current replacement value – and not for the amount they cost you when you bought them. It is important to revise your sum insured on an annual basis.
• Short-term insurance is adequate car insurance. Your policy should provide cover in the event that you were negligent and caused the accident, as the other party would be able to hold you liable for any damages to their vehicle, as well as medical costs. This can easily cause financial ruin and given the high accident statistics in South Africa, it is simply not a risk anyone can afford to take.
Rimmer also shares her best tips on how to ensure your cover is adequate:
• When taking out an insurance policy, make sure that you declare all your previous claims or losses so that you cannot be found to have withheld relevant information, which may invalidate future claims.
• If you are under debt review, you need to inform your broker or insurer.
• If you have a criminal record, this also needs to be disclosed.
• Make sure you give the correct details regarding security measures in place on your property or in your vehicle, for example, whether you have an alarm system linked to a security company at home, or a tracking device or immobiliser in your car.