Tips to avoid overpaying for short-term insurance

Short-term insurance shields you from the financial blow of losing or damaging essential possessions like your home, car, or electronic devices. But that doesn't mean you should be overpaying for this protection, warns South African short-term insurance actuary, John Wessels.

Wessels says if you've been claim-free for years and haven't reviewed your insurance policy recently, you're likely overspending. "Your risk profile may have improved since you first signed up, especially for younger drivers who've gained experience without filing claims. Comparing quotes from different insurers could save you money, but remember to be honest about your claims history," he advises.

Unfortunately, many South Africans see insurance as a "grudge purchase," neglecting it until they need to claim. According to Wessels, this approach is problematic: "Your short-term insurance contract should be readily accessible and reviewed yearly or whenever your circumstances change."

Here’s Wessels’ checklist to guide you through your policy review:

1. Have insurance needs changed?

• Ensure your home and its contents are insured for their current replacement value. Underinsurance could lead to reduced payouts in case of loss.
• Avoid overinsurance. If your possessions are valued higher than their worth, you'll pay more in premiums and might struggle to prove their value during a claim.
• Moving house? Inform your insurer. Premiums may change based on the security rating of your new suburb.
• Notify your insurer if a young adult becomes a regular driver of your vehicle. Be aware of additional excesses in such cases.

2. Are the benefits still relevant?

• If you've paid off your car, remove credit shortfall cover to lower your premium.
• Question whether you still need extras like car hire or power surge cover, especially if you can mitigate risks through other means.

3. Other ways to save:

• Consider a higher excess: Opting for a higher excess can reduce premiums, but only if you're disciplined about setting aside the extra amount for emergencies.
• Upgrade security: Enhanced security at your home can not only protect you but may also lower your premium.
• Maintain your geyser: Preventative maintenance can avoid claims and potential premium hikes.

Wessels stresses the importance of honesty and restraint when filing claims: "Submitting false claims or unnecessary ones could lead to premium increases or even cancellation of your policy. Insurance fraud is a criminal offence, and once your cover is cancelled, it’s hard to find another insurer."

He suggests setting aside time to review your policy thoroughly. "You may discover surprising perks—like insurers rewarding you for a hole-in-one in amateur golf—or learn about liability cover you didn't know you had."

By taking these steps, you can ensure that you're not only saving money but also properly covered should the need arise. Wessels reminds South Africans: "Insurance is a financial planning tool, not just an expense. Treat it with the care it deserves".

PERSONAL FINANCE