Words on Wealth: review your insurance before going on holiday

As the end-of-year holidays draw near, it’s a good time to review your short-term insurance policies to be certain that you are adequately protected and correctly insured. You may even consider shopping around for a better deal or, if you have remained claim-free for an extended period, renegotiate your premiums with your current insurer.

You also need to check that insured assets such as your car and home have been properly maintained and that your car is in roadworthy condition. Maintenance failure or vehicle unroadworthiness can result in a claim being rejected.

Although you should strive for getting good value for money from an insurer, it is advisable not to skimp on premiums by under-insuring or forgoing insurance altogether. Zanele Gigaba, transformation manager at the South African Insurance Association and the current chairperson of Money Smart Week South Africa, says insurance is an essential part of financial planning: “As consumers, we should not look at insurance as an expense, but rather a valuable component of our financial planning and management, as it provides peace of mind and protects us from the shock of damage to or the loss of our valuable possessions such as our motor vehicles, homes and businesses,” she says.

Household contents and all-risks

On your household contents policy, check that you are adequately protected by doing the following:

• Make an inventory of your possessions, allocating a replacement value to each. Remember that, in the case of household contents and all-risks cover, items must be insured for what it would cost to replace them new. It’s worthwhile taking pictures of valuable items as a record of ownership, along with keeping your original receipts for those items.
• The overall content value of your home should not be more than your total cover. If it is, it means you are under-insured and are unlikely to be compensated in full if you claim, owing to the law of average, which brings down your payout in proportion to the under-insured amount.
• Valuable items that you regularly take out of the home, such as laptops, bicycles, cameras, and jewellery, should also be insured separately under a linked all-risks policy, as contents cover applies only to items inside the home.
• Check on your home security to ensure that it complies with your insurer’s requirements. For example, all windows must be barred, and the alarm system and electric fencing, if you have it, must be functioning properly.

Home building cover

Make sure that the total insured amount covers the total destruction of your home – this would include the costs of clearing and preparing the site, having new building plans drawn up, rebuilding, and temporary accommodation.

Maintenance is essential. Ensure your roofing is secure and leak-free, gutters are free from debris, and the plumbing and electrics are in good order. Repair any leaks and check that you are not overloading power outlets.

Don’t forget that the policy covers you for unexpected events, but not for general wear and tear or for losses due to a lack of maintenance.

If you have renovated your home or added features such as a swimming pool or solar panels, your insurer must know about the changes.

Vehicle cover

Unlike household contents insurance, a vehicle insurance policy does not cover you for a new replacement – it covers you for the car’s second-hand retail or market value. The retail value is what an average car of the same model and year would sell for at a dealer, and it is what you would need to fork out if you had to replace your car with something similar. The market value takes into account your car’s condition and mileage, and it is what you would be able to sell the car for privately, making it lower than the retail value.

If your car is financed, you also need to consider the outstanding balance on your loan. To this end, you should also have credit shortfall insurance, which will cover the difference between the amount you still owe on the car loan and the amount your insurer will pay out if your vehicle is stolen or written off. 

Also be certain that the regular driver listed on the policy is correct and, if necessary, tell your insurer about other drivers who may be using the car.

Confirm whether your policy includes emergency towing and roadside assistance, or consider adding it for peace of mind, especially if you are planning a long trip.

Then you need to consider the car itself. Is it roadworthy and has it been properly maintained through regular servicing? Brakes, lights and tires are especially important when it comes to ensuring that your car is reliable and safe to drive. If, for example, worn tires cause you to have an accident in wet weather, your insurer may be justified in rejecting your claim.

Finally, keep a digital or physical copy of your insurance details, policy number, and emergency contact numbers handy when you’re on the road. 

* Hesse is the former editor of Personal Finance.

PERSONAL FINANCE