While it’s a grudge purchase for many, insurance is a necessity. But, with so many products on the market, it is hard to know what’s right for you. Samke Mhlongo unpacks the different forms of insurance, and how to get the best out of them.
Insurance 101
Since my first article was published in March 2018, we have shared many spicy topics such as the financial rights of the other woman or discussing a will with your husband, and had many laughs in the monthly #AskSamke #BONAMoney social media live stream. If you caught the January edition of #AskSamke via Facebook or Instagram, you will know that my in-studio guest Palesa Thloloe, financial adviser at Liberty Life, mentioned that insurance debit orders continue to be the most missed at the beginning of the year. This is dangerous as you are not covered while in arrears. I challenged her saying that sometimes, we find ourselves having to choose what gets paid or doesn’t. If you have or suspect that you may find yourself in this position (temporarily of course), then it helps to know the different types of insurance, what they cover, the consequences of not being covered and tips on making the best use of them.
TYPES OF INSURANCE
I asked John Manyike, head of financial education at Old Mutual, to update my knowledge on all things insurance as it can get confusing. He says the easiest way to think of insurance is to split it into short-term and long-term covers. “Short-term insurance provides cover for your precious assets such as your house, household contents and car. Long-term includes funeral and life cover (with or without the range of severe illness, disability cover and income protection benefits). Additionally, it gives financial stability for your beneficiaries once you are no longer able to, or there to, do it yourself,” he explains. Medical Aid is another type of short-term insurance you don’t want to be caught without, but it can be very expensive! So, I contacted Momentum for a quote on its medical aid to compare with what I currently have. Damian McHugh, head of health marketing for the Momentum Group, advised that for a woman like me, with two young and healthy children, and no chronic disease or requirement for extensive day-to-day benefits (such as glasses or dentistry), I can expect to pay a monthly premium of around R4 500. This is provided I am willing to make use of the extended hospital networks (which include the Life and Mediclinic hospitals), for any planned in-hospital procedures. Given the choice, we would all take out the best available product to cover every possible scenario. Sadly, with the cost of living constantly going up, many people have opted to suspend or cancel some of their policies just to make it from month to month. I took some tips from John and prepared the following summary to help you assess your risk, should you be faced with that decision.
CAR INSURANCE
- Comprehensive – Full cover that pays the insured value of your car.
- Balance of third party – Covers damage you cause to someone else’s car.
- Risk of unpaid debit order – Not having a car and even worse, having outstanding debt with the bank.
- Tips – Try and go without a claim for three years so that you can qualify for a reduced premium. You can also reduce your premium by asking for your excess to be increased (but, only if you it available in savings).
HOUSEHOLD CONTENTS
- Cover – Pays out on everything inside your home. But, the higher the value of the contents covered, the higher the premium.
- Risk of unpaid debit order – Replacing your furniture, TV or laptops at short notice out of your own pocket in case of theft or damage such as a burst geyser.
- Tips – Always state the true value and conditions of the items you are insuring, otherwise insurance may only pay out a portion of the claim or nothing at all. Additionally, try to improve the security of your home by installing an alarm system or security gates, especially if you don’t live in a security complex.
HOMEOWNER’S INSURANCE
Cover – Pays out for the structural damage to your home (e.g. fallen wall) based on the cost of rebuilding to its original state.
Risk of unpaid debit order – Rebuilding a part of your home out of your pocket or taking out an additional bond. The latter will raise your instalment.
Tips – Try to pay this premium because if you have a bond, one of the bank conditions is that you must have active household insurance over the property.
FUNERAL COVER
Cover – Costs of funeral arrangements including coffin, tombstone, catering, venue and transport.
Risk of unpaid debit order – Covering the costs of the funeral yourself.
Tips – From the onset, understand who you need to cover (just you or your family, parents and extended family, too) and how much you need (just coffin and tombstone or all associated costs). This is because the higher the cover amount, the higher the premium. So, rather keep it affordable.
EXTRAS
Damian says in terms of well-being, Momentum Health believes that prevention is better than cure. As such, it offers an extensive health platform benefit that provides for early detection tests as well as preventative screening and care. That reminds me; don’t forget your glucose test and annual Pap smear ladies! Additionally, both John and Damian stress the importance of engaging a registered financial adviser to conduct a thorough analysis of not only your financial needs, but also your affordability so that you never have to find yourself without adequate cover. Consider making that one of your resolutions – to not let another Fit Finance anniversary come by without consulting a financial adviser.
