Guiding consumers since 2009

Three insurance myths debunked

By Jessica Anne Wood

Insurance can be costly and is one of the areas where people try to save on expenses. However, this can end up hurting you financially in the long run if you need to make a claim and you have skimped on your insurance.

“If you aren’t covered sufficiently in favour of paying cheaper premiums, your costs at claim stage could be quite frightening. And your budget can be completely blown,” noted Bertus Visser, chief executive of distribution at PSG Insure.

Visser provided three ways in which people think they are saving, and what could happen if you decide to save money by taking out less insurance.

  1. Opting against value-added cover

Value-added cover includes things such as car hire, which may be useful if your car is sent in for repairs. If you decide to exclude added extras such as these, your monthly premium may be cheaper. PSG Insure noted that it is no longer common place for panel beaters to provide a courtesy car to clients. If you do not have access to alternative transport in this situation, it could be costly having to rent a vehicle.

Visser added: “Some European cars can also require months to repair while replacement parts are imported into the country, which can mean you will be without transport for a very long time.”

According to Visser, car hire cover is traditionally for one month. However, if you own an imported car where it may take longer to repair, Visser suggested that it might be a good idea to extend this to three months.

“Think about the costs for alternative transport from inconvenience to actual expense and decide if not having car hire cover is really worth the small saving on your premium,” advised Visser.

  1. Consider the way you specify items

When it comes to the items you insure, consider how you classify or specify them in your insurance contract. For example, when it comes to jewellery, PSG Wealth noted that you do not need to specify this under All Risk insurance if you don’t wear the jewellery all the time. It may rather be cheaper to put this under contents insurance. This means that the cost of replacing these items has been factored into your overall contents cover.

“A good example of an item like this could be a tablet – you might have one you only use at home, so it doesn’t need to be covered when you are out and about,” explained Visser.

If you are uncertain about whether or not a particularly valuable item should be specified, PSG Insure advised checking with your advisor before including this item with your general contents cover.

  1. Underinsuring versus over insuring

Challenges arise at the claims process whether you under or over insure your belongings. According to PSG Insure, contents insurance is generally the area where people try to save money. However, Visser highlighted that if you under insure your contents, this may result in your claim being rejected or only a portion of the claim paid out.

For example, PSG Insure pointed out that if you have contents with a value of about R1 million, but they are only insured for R250 000, your insurer may only pay out 25% of the R250 000 when you claim.

However, if you over insure your contents, your premiums may be unnecessarily high. Visser emphasised the importance of getting an accurate idea of the cost to replace all your items in the event of a claim.

“You must get an accurate idea of what it would cost to replace everything in your home if you were to have a fire or flood. You must also keep the Rand in mind as to how it will affect the replacement value of imported household items and fittings,” advised Visser.

A safer way to save on insurance premiums is to periodically adjust the sum insured value of your vehicle. The value of a car depreciates, as a result, if you keep your sum insured value of your car up to date, your premiums should decrease as well.

By having all your insurance policies with the same insurer can also save on monthly premiums.  “The more products on a policy, the cheaper the premiums are. It is much more cost-effective to have everything from your car to your contents in one place,” noted Visser.

 

 Handy tip: If you need home and contents insurance, or car insurance, you can apply through Justmoney.

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