How to protect your savings with insurance

If you are not insured, any calamity – be it a storm blowing the roof off your house, a car crash or thieves clearing out your house – can empty your savings account in a flash. However, if you have insurance, you savings are protected.

Recent research shows that the household saving rate in South Africa decreased to -1.10% in the fourth quarter of 2023, down from -1% in the third quarter of 2023. This is not new, Johan van Greuning, head of short-term insurance at Standard Insurance Limited, says, adding that our savings rate has worsened over the years.

“With the sluggish economy, consumers face significant financial strain and as a result, savings have become less of a priority. Consumers who are struggling to save amid tough economic times should see their insurance as an opportunity to protect the savings they may already have.”

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Short-term insurance can prevent draining your savings

Short-term insurance is designed to cover immediate risks and unexpected incidents that can otherwise drain your savings, Van Greuning explains. “We must think of car, home, business and travel insurance as safety nets for life’s little surprises.”

He says short-term insurance acts as a financial buffer, protecting you from sudden expenses that could disrupt your savings goals.

Consider this, he says. “You and your family have been saving diligently for the past two years to buy your new home. Without cover, an unexpected car accident could force you to use those savings for car repairs. This situation can be financially devastating, especially if the costs are high, delaying your plans for a new home. All of this could send you a few steps back in your savings plan.”

Having short-term insurance allows you to focus on your savings goals with less worry about potential setbacks. In essence, it provides a safety net that supports both your immediate and future financial health, he says.

“In addition to protecting against immediate expenses, short-term cover can also provide a sense of financial security. “

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Helping you manage risk

According to Dr. Hardy Ncube, head of personal products at Standard Insurance Limited, short-term insurance provides peace of mind knowing that you are safeguarded against unexpected financial burdens resulting from an insured event.

“Insurance is not just a policy. It is a proactive approach to managing risks, although it is important to understand that a short-term insurance policy is not a maintenance policy and consumers must take appropriate measure to maintain their cars and property.”

He says by integrating short-term insurance into your financial plan, you essentially create a buffer that helps preserve your savings and ensures that you can continue working towards your long-term goals without unnecessary interruptions.

“Long-term insurance also provides a critical safety net, enabling you to manage significant and sometimes life-threatening events and uncertainties without compromising your savings. It is a vital tool for financial planning and stability,” says Kresantha Pillay, head of Lifestyle Protector at Liberty.

“Imagine being diagnosed with a critical illness such as cancer. The medical expenses can be overwhelming, potentially wiping out your savings. Long-term insurance, like critical illness cover, can assist in providing the necessary funds to cover treatment and recovery costs, allowing you to focus on your health without the financial stress.”

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Benefits of long-term insurance

She says it is also worth remembering that long-term insurance policies can serve as a financial cushion for your loved ones in the event of your untimely passing. “Life insurance, for instance, can ensure that your family’s financial needs are met and could be used to cover expenses like bond payments, education costs and daily living expenses.”

In addition to providing immediate financial support, insurance helps individuals stay on track with their long-term financial goals, Van Greuning says. “By protecting your savings with insurance, you ensure that your funds remain available for significant life goals, such as your children’s education, buying a home, or enjoying a comfortable retirement.”

Pillay says consumers must remember that insurance is not just a safety net, but a proactive strategy for financial resilience. “By integrating insurance into your financial plan, you create a strong financial muscle that supports your journey towards financial security and peace of mind.”