Though it’s tempting, don’t put yourself at financial risk

BY: CRAIG MENDELSON

WITH A third wave of COVID-19 and the threat of stricter lockdown regulations looming, many South Africans are revisiting their monthly budgets to cut costs. Short-term insurance premiums may be an easy target, but there are ways to reduce your premiums without leaving yourself exposed.

For many consumers, doing away with grudge expenses such as insurance premiums has become a real consideration. However, before you make the decision to cancel your insurance, it’s important to weigh up how much risk you could absorb financially if something unexpected happens.

You’ve worked hard to buy your home, your car, and your belongings—and one of your top priorities should be to preserve these assets. Your insurance cover is the safety net that will protect you financially should that ‘what can go wrong’ scenario ever materialise—a car accident, a fire in your home, a burglary, or even a burst geyser.

Therefore, instead of leaving yourself without insurance, consider these top tips to save on your monthly premiums:

REVIEW YOUR COVER
Your first step should be to meet with your insurance broker to review your cover and work through your policy schedule. Brokers are here to help, not to judge.

A review of your portfolio may point out potential risks that you have not considered, and your broker will be able to advise on how to reduce your insurance premiums without compromising your financial security.

SMALL CHANGES CAN HAVE BIG SAVINGS
You will probably find that you are pay-ing additional premiums for specified items such as jewellery, your cell phone, and your laptop. This made sense when you were in the office every day, but if you are working from home, your risk (loss or theft) of these high value items is drastically reduced.

You can look at removing these from your policy, selecting a limited cover option, or even choosing a higher excess fee on these items, which will significantly reduce your monthly premium. It’s also a good idea to check what items are insured, as you may not realise that you’re paying for something that you no longer own!

AMEND VALUES, AND CANCEL UNNECESSARY COVER ITEMS
Your broker should be reviewing your insurance on an annual basis. Amend the retail value of your vehicles, and (if need be) the sum insured of your contents and building. In addition, if you are working from home and driving less, you may qualify for a lower premium—so it is advisable to see if your insurer offers any discount for reduced travel.

Also ask your broker to check if you have selected car hire to be included in your insurance, as cancelling this will also save you money—however, this must only be done if you have access to a second vehicle, as repairs can take time.

MAKE SURE THAT YOU’RE NOT UNDERINSURED
Most of us underestimate the full value of our homes and contents, and ‘guess’ the value instead of insuring for replacement value. If you guess wrong and you are underinsured, this can land you in a world of pain when you want to claim.

As an example, if your household contents are valued at R100 000 but your premium is based on R50 000, you will only be paid 50% of the value of any claims you make.

If you’re not sure of the replacement value of your building and home contents, it’s wise to use a professional insurance evaluator—but if your goal is to save money, park this until you can afford it.

CONCLUSION
Your insurance benefits are tailored to your personal needs, and you have a say in how they are managed. Therefore, if you are working from home and your risk is lower, adjust your policy. If your circumstances change in a couple of months, then adjust it again.

A good insurance broker will be only too happy to structure the best deal for you based on your current insurance needs.

Craig Mendelson is a short-term insurance specialist at Consolidated Wealth.

Insurance is like a parachute—you don’t want to have to use it, but it’s there if you need it.

Picture credit: Ali Kazal (Unsplash.com)