The last year has had a devastating effect on nearly every household’s finances. The Momentum/Unisa 2020 Household Financial Wellness Insights report estimates the loss of gross income from South African households to be around R331 billion.
How are our finances supposed to cope? According to Regional General Manager at Limpopo Momentum Marian Nel-Fouche most financial advisers will agree that ‘coping’ should not involve cancelling insurance policies.
It could hurt you when you want it back
Many South Africans forget that being without cover affects their risk profile. “A break or gap in your cover will render you as a ‘high-risk’ policy holder because you failed to uphold the agreement terms with your insurer. This means the next time you apply for insurance, this break or lapse could negatively affect your future premiums, which could result in much higher rates.”
“What if?” could become “What now?”
Nel-Fouche believes that South Africans do not generally like to consider the ‘what if’ questions. This is proven by the fact that the South African Insurance Association (SAIA) found that approximately 70-80% of South African motorists are driving uninsured.
“Comprehensive vehicle cover provides you with financial protection and peace of mind should your car be stolen, hijacked, or damaged in an accident. It also covers you for third party liability – where you may become liable for damaging someone else’s vehicle or injuring someone through an accident involving your vehicle.”
Cancellation is not the only option
Before you consider cancelling your short-term insurance, she provides ways that could help reduce your monthly premiums but still keep you covered:
- Contact your financial adviser to see if you can reduce premiums as opposed to not paying or cancelling your policy.
- Ensure that all your asset descriptions are correctly noted.
- Update the asset values on your policy.
- Remove disposed/sold assets from your policy.
- Review your risk profile and decide which risks you can afford to bear yourself.
- Review your insurer, broker, cover, and premiums regularly – during trying times, insurers may have various options available to assist clients.
“By going through this checklist with your insurer or financial adviser, you may benefit from decreased insurance premiums as a result of your profile update. It is important to be covered and protected in what is, perhaps, the most unpredictable time in our economic history,” concludes Nel-Fouche.
