Life is full of uncertainties and often times, the last thing you want to stress about is how you are going to recover from any inconvenience, damage or loss to your assets.
With the state of our economy, there also isn’t much money to go by, especially when you need to be saved on a rainy day.
While it may be deemed as a luxury to some, it increasingly becomes a need in one’s life as one gets older and accumulates more responsibilities.
Also, it doesn’t hurt to have something to always fall back on when life deals its card or so we’d like to believe.
As South Africa celebrates national insurance awareness day, Hollard Life Solutions consumer engagement manager, Reuben Oosthuysen says, “Whether individuals already have insurance cover in place or not, this day aims to create awareness about the vital role that insurance plays in helping consumers manage risks and providing them with peace of mind, knowing that they will be protected when they need it.”
For those who are already insurance holders, this day presents just the right opportunity to review policies, terms and conditions as well as ask important questions such as; is this policy still sufficient for my needs, do I need to update or change any details, such as contact information, address, or beneficiaries or is this still the best product for me?
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Just like when you grow out of a pair of shoes, one’s insurance needs to change when they enter different seasons or periods of life and ultimately death. As needs change, reviewing and adjusting policies to match this, is necessary.
Here are the two questions that Reuben says should be considered in celebration of this day.
Are you still getting the best deal? We all want to make sure we are getting the best possible cover for the cost of our monthly premiums and as different insurers develop different products to cover specific needs in the market, you may be able to get more comprehensive cover for a similar premium or similar cover for a reduced premium in switching products to insurer.
Have your needs changed? Ask yourself some of these questions and consider how you may need to update your policies to best ensure you are protected and have that peace of mind. If your needs have changes, you may need to upgrade your cover amount, change the kinds of risks you are covered for, or take out a new/different policy to reflect these life changes. Are you recently married or divorced? Have you had or adopted a child (or became a grandparent)? Have children or grandchildren who are about to enter university/college/tertiary? Provide care or financial help to a child or elderly parent? Receive an inheritance? Retire (or your spouse retires)? Started a business? Changed or lost your job or salary?
As for those who are not yet insured, this could be the day to explore insurance products at their disposable and compare offerings from one to the next.
“It is essential to consider yourself, your income, perhaps any business interests you may have, consider your loved ones and any dependents, and also consider any assets you may have (such as a vehicle, home, and other valuables). Reflect on the potential impact if you were to lose your ability to earn an income or any of these other interests,” Reuben says.
What cannot be ignored though is how the cost of living has risen, causing people to pull back from incurring monthly insurance costs which Reuben refers to as “grudge purchases”.
According to him, when the budget is tight is exactly when you need insurance the most because you cannot afford to recover from a loss or damage.
A recent concern among insurance holders has been how the wording of policy terms are revised whenever risks out of consumers’ control arise, i.e. house damage because of tremors and solar system installations.
Addressing this with Drum, Reuben says there are two pressures that insurance companies face, leading them to further “clarify that these events are not covered by insurance.”
“The first pressure arises from the difficulty of responsibly pricing an insurance product to account for the potential accumulated value of losses that could be experienced. It may also be challenging for insurers to maintain the necessary capital required to cover such losses.”
“Secondly, just as individuals take out insurance to protect themselves, insurers themselves often obtain re-insurance to safeguard against their own losses from these events. If re-insurance becomes unavailable, insurers may need to clarify these exclusions due to the financial risks involved,” he adds.
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While some people who may find that they are not insured enough for the season that they are in in life because they probably got their insurance at 23 years old and now, they are 30 years old with more responsibilities and more to lose, others may find that they have too much insurance on their hands.
To tell the difference between the two, one needs to think about how deep they would need to dig into their pockets in order to replace an item, asset or bid a dignified farewell to a loved one. More often than not, you would have had the option to increase your premium over time to avoid digging too deep in your pockets to add onto your payout.
Elaborating on this, Reuben says, “We may be over-insured when we are paying a premium amount to cover a risk of greater value than our actual loss (which means we could have been paying cheaper monthly premiums). To prevent this from happening, review your insurance policy annually and establish if the policy amounts, premiums and covered risks are adequate.”
He adds that “You could estimate the cost of replacing an item, house or income and this could guide you in the policy you require. Make sure that you have not duplicated policies such as multiple life insurance policies. You could also bundle your insurance so that all insurance falls under one company (this usually helps remove duplicated costs).”
- Engage with a broker or advisor. Insurance brokers and financial advisors are qualified professionals who are able to assist you in making insurance-related decisions and ensure you consider the most appropriate cover options for your needs. They are also likely able to structure your insurance packages to your bespoke requirements, and this is especially useful were you to have complex insurance requirements or if you are the type of person who wants to have a more personal relationship with your insurer.
- Do you and your loved ones know how to claim if needed? Once an event has occurred where you may need to claim, ideally we would already know how to claim, the requirements and processes for our specific insurer. Imagine the scenario where you may no longer be around and your loved ones may need to claim from a life or funeral policy, how can you ensure they are taken care of?
- Consolidate policies. Having multiple policies with different insurers to cover the same risk, which is often seen in consumers taking out multiple funeral policies with different insurers) may mean you are paying more in monthly premiums than if you had a single policy for the full benefit amount, as each insurer is likely to have administrative and commercial costs embedded in their premiums. You may also want to consider a different product type, for example taking out a life policy instead of a funeral policy could cost you less in monthly premiums for the same cover amount.
- Engage with your insurer to understand how you could reduce your monthly premiums. Some insurers may have products or programs that reward you for specific types of behaviour and can reduce your premium. Whether a life or short-term cover, your insurer may have ways that you could intentionally save on your monthly premiums.
- Understand what you are covered for and what not. No one wants to find out that they were not covered for a risk or discover they misunderstood their policy when they need to claim after a risk event has occurred. It is wise to ensure you are familiar with what you are able to claim for and what not, such as any terms and conditions related to your cover, any standard or specific exclusions that may be in your policy. If you are unsure about this, you can always engage directly with your insurer to understand whether your current policy covers you for a specific event.
- Vehicle cover benefits: When you buy car insurance you have the option to pay for the benefit of a rented vehicle, whilst your vehicle may be repaired after an accident. This is a great benefit, but if you work from home or will be able to use alternate transport, you can reduce your monthly premium by excluding this benefit.
- Know your excess: When you claim on a short term insurance policy, you may be asked to pay an excess. Most insurers will give you a choice of the amount of excess that you are willing to pay and this will impact your premium. The higher the excess, the lower your premium.
- Geysers: I recently had a burst geyser and anyone who has experienced this is aware of how costly and disruptive this can be, having insurance in place can make a big difference. Your house insurance policy usually also include cover for your geyser and should you have a burst geyser your insurance company can be contacted to send out one of their service providers to fix it whilst any damage as a result thereof is usually also included in your house insurance.
- Life cover for younger South Africans. If you are healthy, consider buying fully underwritten life cover that includes upfront health assessments/tests, as such life cover may often be better priced that general life cover where you are not required to do health assessments. Always fully disclose any health conditions upfront to ensure that your policy is valid.
