"Unfortunately", says Clint Harker of Pinion Insurance Brokers, "a lot of people who have splurged on expensive items find they are unable to afford the costs associated with owning these items."
Luxury items not only don expensive price tags, but the associated upkeep; financing and insurance costs necessary to maintain them can be extensive and are often overlooked by consumers. In the case of car insurance, for example, insurance can cost as much as 3% of the vehicle's original value. New boats - another favourite luxury purchase - have relatively low maintenance costs for the first three years. However, thereafter operation and maintenance costs increase exponentially including costs for fuel, transport, trailers, storage, repairs, cleaning, paint and labour.
Harker advises people to take some time to understand the additional costs associated with buying a luxury item. He points out that it is not as simple as having enough money to pay the asking price. Many South Africans, after acquiring an expensive luxury item, find that they cannot afford to add the valuable acquisitions to their insurance policies, potentially leaving themselves open to financial loss either through loss, theft or damage.
"People are often shocked when they realise that they do not have the funds to commit to the maintenance or insurance after purchasing valuable assets. The important thing to remember is that if you cannot afford the additional costs of your purchase, then in reality, you cannot afford the asset at all."
Harker also notes that in some cases, wealthy South Africans simply forget to insure new assets - or are not aware that the asset is not covered by their existing insurance policy. Most traditional insurance policies would require any new expensive items to be specified in order to be properly insured and might also need proof of purchase. "While certain insurance brokers automatically include new acquisitions under an all-risks policy, it is dangerous to assume that expensive acquisitions will be covered if you have not consulted with your broker upfront."
"It is also good idea to get into the habit of keeping receipts and any other information that relates to such purchases."
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