Each year it is advised that you reassess your insurance policies. Throughout the course of a year there are a number of things that may arise and change the required cover or value of your insurance. According to Wynand van Vuuren, head of legal and claims for King Price Insurance, everything of value in your estate should be insured.
Schalk Malan, CEO of BrightRock, highlights that there are three types of insurance products that you should prioritise. These are life insurance, health insurance, and short term insurance, such as home and car insurance.
Insurance for you
Malan emphasises that your income is your most valuable asset, and losing your income due to serious injury, illness or death (which would impact your family) will have a significant impact on all your financial responsibilities. This is where life insurance, as well as dread disease cover (aka. critical illness cover) and disability cover come in.
Insurance company 1Life explains that life insurance is designed to replace the loss of the life assured’s income as a result of death to help ensure the future financially stability of the assured’s beneficiaries and dependents.
Dread disease or critical illness cover pays out a lump sum in the event that the assured is impacted or diagnosed with a dread disease. “This policy is designed to help with costs associated with a serious illness, it can be utilised to cover any additional costs that medical aid doesn’t cover,” notes 1Life.
If you are unable to work while faced with the dread disease, this cover provides financial peace of mind at the time, as your financial commitments can still be met.
Furthermore, 1Life stresses that disability cover should be considered from a young age to ensure that you can protect your lifestyle once you start earning an income. This can include a lump sum or monthly payments in the event of a disability. “A disability can be temporary or permanent and caused by a number of reasons, namely injury or illness.”
According to Malan, it is important to at least have a hospital plan in place to help with medical expenses. He explains: “There is a high demand for health care at government hospitals, resulting in long waiting lists. As a result of this, you might not receive critical or emergency treatments as promptly as you would at a private facility. A hospital plan will enable you to afford and access immediate health care at times where you need it most.”
Insurance for your assets
When it comes to your assets, you need to consider what it will cost you to replace them and ensure that the cover you have in place will be enough. Malan points out that with short term insurance you will be able to protect valuable assets (such as a house or car) where the loss or damage of the asset has the potential to severely impact your personal finances.
Van Vuuren stresses the importance of having any buildings you own comprehensively insured. The cover should include fire, theft and acts of nature. “The building must be insured for what it will cost you to rebuild it again, with the same finishes.”
It is also important to insure the valuable items that you may carry with you. While they may be included in your home contents insurance, they will not be covered if you remove them from your property, such as jewellery you may wear or your laptop. Van Vuuren suggests having these items insured under portable possessions.
“If you own a vehicle and cannot afford insuring it, at least consider a third party insurance policy that will cover any liability on your part in the event of an accident,” advises Malan.
Something that you may not consider insuring is your wardrobe. You need to consider what it will cost if items such as your clothing and shoes are stolen or damaged, such as in a fire.
Annelie Smith, corporate executive at Risk Benefit Solutions (RBS) says: “The vast majority of policyholders are far off in their estimates when it comes to the cost of their clothes and shoes. Most people think the replacement value of their wardrobe after a catastrophic event, is around R10 000 when in fact it is probably closer to R100 000 or more depending on the size of the family.”
Reassessing your insurance
Lizette Erasmus, insurance expert at IntegriSure, emphasises that when reassessing your insurance the most critical area to look at is the replacement values of the items insured. The replacement value will change over time, so it is important to ensure that the valuation with your insurance company is accurate.
“Ensuring that you are insured for current replacement values on your insured possessions means that you will not have to pay-in the shortfall to replace lost possessions at claims stage. It is advisable to update these values twice a year due to fluctuating markets,” points out Erasmus.
Smith adds that you need to ensure that your policies are updated and that you are still getting value from them. Furthermore, you also need to be aware of any policies changes, make sure you add any new requirements to you policies, and that you still understand your responsibilities in terms of managing the risks outlined in the policies.
There are a number of major events which may result in you needing to reassess and update your policies besides the need to review them once a year. 1Life offers the below events as examples:
- Change in income
- The birth or adoption of a child or a change in your dependants
- The purchase of a new house
- Marriage or divorce
- A change in your policy beneficiaries
(Re)Negotiating your insurance premiums
According to 1Life, it is important to “treat your relationship with your long term insurance company as you would treat your other relationships – as this too requires an open line of communication in order to ensure that you are getting the best out of it.”
Van Vuuren notes that the best way to start (re)negotiating your insurance premiums is to not just accept the first insurance quote you receive, whether it be from a broker or a direct insurer. Shop around for the best price and compare what each insurance company is offering to make sure you get the best cover for the best price.
Erasmus offers the following tips:
- How much you mitigate the risks in your life can give you an edge when renegotiating your premiums.
- Decide what cover you don’t need anymore.
- If you want to renegotiate because times are tough, play open cards with your insurance provider to ensure that you still have basic cover in place and, if nothing else, at least have third-party cover to assist you should you be liable for damage to someone else’s property.
Handy tip: You can apply for a range of insurance products on Justmoney.