5 insurance myths costing South Africans

From our homes to our cars and livelihoods, insurance is meant to safeguard the things that matter most to us. However, many South Africans still misunderstand what that protection really includes. These misconceptions around cover can create a false sense of security, only to surface as costly surprises when one needs to claim.

With only a few months left in the year, here are some of the biggest insurance myths to leave behind in 2025:

Business insurance is only for large companies

Many small business owners believe insurance is only necessary or affordable for larger corporations. Yet, smaller operations often face greater vulnerability to risks such as theft, fire, cybercrime, or employee fraud, because they may lack the resources to recover quickly or to safeguard against these issues. The cost of a single incident could outweigh the cost of tailored cover.

Business insurance solutions are scalable and can be designed around a specific risk profile, ensuring that even smaller start-ups have access to protection that keeps trading going. Working with a qualified insurance adviser can really help to identify tailored cover solutions.

Homeowners' insurance covers everything inside the house

Homeowners insurance is often confused with household contents insurance. Homeowners' cover applies to the physical structure of a property – the walls, roof, and fixtures – while household contents insurance covers the possessions inside, such as furniture, electronics, and clothing.

Another common misconception is that insurers cover damages caused by mould, damp, or gradual wear and tear. These are generally excluded because they result from poor maintenance rather than sudden, unforeseen events, which insurance is designed to safeguard against. To avoid surprises at the claim stage, an insurance adviser can provide you with upfront advice in terms of what each policy will cover and will specify what your responsibility is to maintain to have a successful claim.

Car insurance premiums depend on the colour of the car

Some people believe that if you drive a car in a colour which is generally associated with sports cars, it attracts higher premiums. However, de Kock asserts that insurers don’t use the colour of your car to determine the driver’s risk rating. Premiums are determined by risk-based data such as the make and model of the vehicle, repair costs, safety features, where it is kept overnight, and the driver’s history.

Similarly, while age does influence risk calculations, young drivers are statistically more likely to be involved in accidents; it is only one of many variables being considered. Myths like these can prevent motorists from shopping around for cover that accurately reflects their risk profile.

Insurance is too expensive

Many people assume that insurance is a luxury rather than a necessity. In most cases, however, the cost of going without cover is far higher than paying a monthly premium. Whether it’s replacing a stolen vehicle, repairing storm damage, or covering legal fees from a liability claim, insurance prevents sudden shocks from derailing finances.

Affordability also depends on tailoring a policy – an adviser can help to balance cover within a budget and highlight opportunities for cost savings, such as adjusting excess levels or bundling personal insurance policies.

Advisers just add to the cost

Another misconception is that working with an insurance adviser is unnecessary or will make cover more expensive. In fact, advisers often save money for their clients by helping them avoid underinsurance, duplicated cover, or paying for benefits they don’t need. They also provide valuable guidance when navigating complex products such as cyber insurance or fidelity cover for businesses.

Many of these insurance myths persist because they’re based on outdated information or confusion between different types of cover. Rather than relying on inaccurate assumptions that can leave dangerous gaps in protection, close off 2025 by understanding what policies include, addressing any exclusions, and working with a trusted adviser who can separate fact from fiction.

* De Kock is the head of distribution at PSG Insure.

PERSONAL FINANCE