Unlike life insurance, cover for your material assets (short-term insurance, also referred to as “non-life insurance”) can be amended with ease: you can add or subtract items with just a phone call and, if you’re unhappy with your insurer or believe you are paying too much, can shop around for a better deal. But treating your insurance too casually could count against you.
Insurance experts highlight the following ways to optimise your cover:
Cheap cover may cost you more
When it comes to car and home insurance, it’s tempting just to choose the provider that offers the lowest premium. But your research needs to go deeper than that – you need to know what you’re getting, or not getting, for your money.
Shweshwe Tlhapane, Chief Marketing Officer at Momentum Insure, says a lower premium almost always comes with structural trade-offs. “To offer a lower price, insurers must reduce their risk exposure, which shifts the financial burden back onto the consumer in several ways. These may include inflated excesses, aggressive exclusions, and other restrictive terms.”
It’s important to understand the implications of these trade-offs when you sign up, Tlhapane notes. “An unexpected expense when you claim defeats the purpose of having insurance in the first place. Taking the time to read the fine print or consulting with a financial adviser ensures you make a balanced decision based on long-term protection rather than short-term savings,” she says.
Do a regular review
Thabo Twalo, Chief Underwriting Officer at Santam, says that, for many South Africans, insurance is something that is largely forgotten about once it is in place. “The reality is that our lives are constantly changing, and our insurance needs evolve with them. Actions such as buying a new car, upgrading a cellphone, taking on new financial obligations, getting married, or starting a family should all prompt a review of your cover,” he says.
Even if nothing material changes in your life, your insurance needs still change over time. “Inflation, rising construction and replacement costs, currency volatility, climate shifts, and global supply chain pressures can all significantly impact the value of the assets we insure. A home that was adequately insured a few years ago may no longer be insured for its true replacement value today. The same applies to household contents, vehicles and many other assets,” Twalo says.
This means you should review your cover regularly – for example, once a year – regardless of material changes to your assets.
Your financial behaviour matters
While it may pay to switch to another insurer, don’t make a habit of it – insurance companies take note of these actions. Other forms of financial juggling, especially where credit is concerned, may also count against you.
John Wessels, actuary and member of the Short-term Insurance Committee of the Actuarial Society of South Africa, notes that insurers have access to your credit record compiled by credit bureaus. Adverse information on your record marks you as a risk to insurers, meaning you may pay a higher premium than a lower-risk customer or even be declined cover.
“Every financial step you take is recorded by a credit bureau: where you bank, whether you have a mobile phone contract, your credit purchases, debt defaults and court judgements, whether you jump around between insurers, how often you claim, and even your marital status and how many dependents you have. Any information you provide on a credit application is shared with credit bureaus, along with your payment history related to the agreement,” Wessels says, adding that that credit bureaus use this information to create insurance-specific scores on consumers who apply for short-term insurance.
Managing your money responsibly, including acting honestly and prudently in your dealings with insurers and credit providers, will lower your risk profile and improve your standing among providers, typically translating into lower premiums and more certainty in claiming successfully.
