Avoid costs shock with regular review of insurance

Most insurance policies are renewed every year, which means many people simply forget about them after the initial set-up phase. This can be a costly mistake.

If you find yourself having to claim five years down the line, and you haven’t kept track of your policy and coverage from year to year, you could be in for a nasty surprise.

Research has shown that about 40% of consumers are under-insured.

Five questions to consider when reviewing your insurance:

Has your life stage changed?

Marriage, divorce, having a baby, or buying a new home can all affect your insurance coverage requirement and may mean that you need to adjust your policies.

Be sure to keep your insurance adviser informed of any changes.

Is your car insurance up to date?

Your insurer will adjust your car’s value every year since it is a depreciating asset (unless it is a vintage or collectable vehicle).

This means the sum insured will decrease, unless you have an agreed value policy which is based on the initial purchase price and not the depreciated value.

In either case, the cost of replacing your car can be budget-breaking if you are not adequately insured.

Check your policy requirements carefully every year.

Have you added new valuables to your household contents cover?

The replacement value of your household contents is likely to change from year to year.

Some items, such as electronics, may have decreased in value over time, whereas others, such as art or furniture, may have increased.

Remember, you need to calculate the cost of replacing these items, not the amount you originally paid for them.

Is your homeowners’ insurance adequate?

Your home should be insured at the full value it would cost to replace.

This is calculated based on current building costs including professional fees, which increase from year to year.

If you’ve done any renovations or home improvements, notify your insurer.

Keep in mind that mortgage bond insurance is not necessarily sufficient as it simply increases with inflation, whereas increases in building costs exceed inflation.

Is your business owners’ insurance up to date?

If you are a business owner, you will need to consider more than the overall replacement value of your property, buildings, equipment and stock.

Also think of factors that may not necessarily be top of mind: escalating building costs, rising replacement costs of imported stock, peak period stock levels (when you might need to adjust your cover) and the costs of rubble removal if your premises are damaged by fire or floods.

Resist the temptation to cut costs

As consumers across the country are feeling the pinch of a sluggish economy, many will be looking for ways to cut costs.

As a grudge purchase, insurance policies are often the first expenses to be pushed aside.

This is a big gamble that could land you in dire financial straits if anything goes wrong.

Rather speak to your insurance adviser about ways to reduce your premiums without leaving yourself exposed.

● Bertus Visser is chief executive of distribution at PSG Insure