Don’t leave yourself without cover

Thinking of reducing expenses? Don’t cut back on your insurance cover – it may leave you vulnerable and open to even larger costs – without the safety net of having an insurer to assist you. There’s nothing you can do to prevent certain incidents that would leave you out of pocket if you had to repair the damage yourself.

You may think that you are a safe driver, or only travel short distances – so do you really need car insurance? Sadly, no matter how safely you drive, you have to consider other factors beyond your control, such as others on the road who may cause you to be in an accident. Or a hailstorm may damage your vehicle. According to the Automobile Association, between 65-70% of vehicles on our roads are uninsured, so if you are involved in a road accident, you have a minimal chance of the incident occurring with someone who is insured and can pay for any damage!

Some options to consider:

· Discuss the annual value of your vehicles with your broker – most vehicles depreciate in value over time. Don’t be paying more than you should be for your vehicle to be insured.

· Get a more affordable vehicle that will cost less to insure.

When insuring your vehicle, remember to factor in items like modifications, expensive rims, bike carriers, non-standard sound systems, etc.

Protect your other assets

In terms of other protection, homeowners should have enough insurance to cover the cost of rebuilding their home, from the foundation up, in case of a fire or other disaster that make it impossible to salvage.

Remember that being underinsured is also a problem. This is when your property, assets and valuables are insured for less than their actual value at the time of the claim. If you are underinsured, you may receive a reduced payout in the event of a claim. In this situation, insurers commonly apply the ‘average’ clause, which means that the insurer could pay a proportionate settlement: the amount paid will be reduced in proportion to how much you are underinsured.

To explain the ‘average’ clause: you may have your home insured for R1-million. However, it would cost R5-million to rebuild it from scratch if it was burned to the ground. So you are only covered for one fifth of the rebuild cost and the insurer would only pay you one fifth of the cost of rebuilding your home. The reason for this is that the insurer has been receiving premiums based on one fifth of the total sum at risk to the insurer.

Protect yourself from being underinsured

It is important to regularly re-assess the cost of replacing the contents of your home or commercial property and its contents. Your quotation – and the value of your insurance – will depend on your valuation of your own assets. Don’t be tempted to underestimate how much it would cost to replace your possessions or stock, and don’t rely on the current market value of your property when estimating how much cover you need to be adequately protected. Construction costs have seen a steep increase in recent years for various reasons, and the price of household goods has also seen a major upturn. So to replace items such as TVs, microwaves, furniture etc could potentially cost more than anticipated.

You should also consider the possibility of partial loss of the home / property / stock, and factor in the costs of clearing the site or removal of damaged items.

Something else to consider – will you have to pay to rent property elsewhere in the meantime?

Keep the amount you are insured for ‘real’

Your insurance needs to be reassessed annually to take into account factors such as high-end new purchases, expansion or upgrades to your home and property, the exchange rate and inflation fluctuations. Be thoughtful about the cost of rebuilding your property or replacing lost or damaged items. Mobile phones, for example, have become increasingly expensive over the years. If you have added improvements to your home, such as a new entertainment area and pool, or upgraded your kitchen and bathrooms, or installed solar panels / generators / invertors etc to cope with load-shedding, you must tell your broker, so your cover can be adjusted accordingly.

So cancelling your insurance cover is not a good idea and may leave you in a worse-off situation. Rather sit down with your broker to discuss how to reduce your monthly premium while remaining insured. There are more reasons to be insured than not to be!