When and how to review your insurance products

With South Africans facing the reality of more costly living expenses, we often look for measures to lower our monthly expenses, with insurance options habitually being the first to be reviewed.

Rudolf Britz, Chief Actuary at Momentum Short-term Insurance

It is, however, important not to cut insurance from your budgets completely, but instead review the assets listed under your policy to ensure you are adequately covered should an incident arise.

Rudolf Britz, Chief Actuary at Momentum Short-term Insurance, says life doesn’t happen in discreet intervals, but rather in a continuous fashion. “Because our financial plans and budgets are the tools we use to plan for our lives, it only makes sense that we review them as and when life changes.” 

“While it is not a good idea to make changes too frequently (especially with long-term savings), it is important to regularly check that your plans – especially those meant to protect you – still reflect your living reality.”

The current global Coronavirus pandemic has heightened our sense of urgency to review our personal finances and to make more sensible decisions now, which will carry us into the future.

In the context of short-term insurance, it is important to ensure that the assets you hold dear are adequately protected in the event of an unforeseen incident involving damage or loss. 

Britz says that while this may sound tedious, it is a fairly easy process. “List all the assets you own, place a value to each – preferably an objective estimate – and ensure that they are specified under your insurance policy and that the level of excess (your own contribution in case of a claim) is in line with your ability to sustain losses from your free cash flow in any given month.”

If you need assistance with your financial review, the majority of insurers would be able to help with a basic analysis; however, it is advisable to consult a qualified financial adviser for a more in-depth review. 

There are a number of factors you need to consider when conducting a financial review, and it is therefore, imperative that the asset list be as complete and accurate as possible. This is why it is crucial that an objective, but current, assessment of the value of each item be determined, as items are often insured for the value they were purchased for, without allowing for inflation or consideration of what it would cost to reconstruct the same asset.

Britz also advises that items which purely hold sentimental value should not be insured unless a loss or damage to the items would cause financial distress.

“In the event of a loss, the real value of an insurance product is to have as small an impact as possible on the individual’s cash flow. For motor vehicle insurance for example, it’s imperative that the particulars of the owner, regular driver and asset be truthfully divulged and correctly disclosed upon take-up of the policy” explains Britz.

If not, the claim may be rejected, given that the driver may not be listed as the vehicle’s regular driver, which can cause further frustration and complications.

So, if you are under pressure to reduce costs, it is advisable to rather thoroughly investigate and prioritise which items are insured under your policy, as well as the amount of cover that has been allocated to each and check that all the information is correct, instead of cutting back entirely when times get tough.

“In trying to cut costs, it is easy to overlook the fact that items such as cars may result in a hefty financial burden should they be incorrectly covered, with the client having to fit the bill in the event of an accident or theft and causing further financial stress,” concludes Britz. 



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