In response to the highly anticipated 2019 Budget Speech, Santam, South Africa's largest general insurer, encourages consumers to take the opportunity to look at practical ways to adjust their household budgets.
Andrew Coutts, Santam head of Intermediated Distribution, says: "After surviving a challenging 2018 and with further fuel and excise duties on alcohol and tobacco increases anticipated, many families will feel the financial pinch. Reviewing your financial budget annually, just like the government does for the country every February, is very crucial in ensuring that you are financially protected should anything happen to you or your much loved and treasured assets."
When times are tough, insurance is usually one of the first areas people consider to cut down on or eliminate entirely as a monthly expense. Although your recurring insurance policy may seem like it is causing a significant dent in your budget, it is important to consider all the risks and disadvantages that could result from cancelling your policy before you resort to any drastic decisions.
Instead of cancelling your insurance policy, Coutts provides households with some pertinent tips on how to get the most value from this recurring monthly payment:
Protecting yourself against the financial impact of life surprises
- With short-term insurance, you're not insuring yourself against a predictable eventuality; you're insuring yourself against unpredictable risks. You can't know if you'll be in a car accident tomorrow, if hail will destroy your roof or if your engagement ring will be stolen.
- Consider taking a higher excess to reduce your monthly premium, but still have cover if you really need it.
- Your vehicle insurance premium could be discounted if you've fitted your vehicle with a tracking device.
- Consider a lower powered, lower value and low theft risk vehicle as these are just some of the factors that influence vehicle premiums.
House contents
- Think about the things you own and the value they bring to your life. Some things – like your jewellery and rings – may have sentimental value. Others – like your laptop, tools or car – might be essential to your business or savvy side hustle. Consider whether you can afford to lose these assets – should a flood or fire destroy part of your house, for example – and that'll help you determine whether it's worth insuring them. It may be the case that you can afford to replace them if they're stolen. But also consider the effect that'll have on your finances in the short and long-term.
- Always ensure that the insured amount of house contents should represent the new replacement value. If overly inflated, this can increase the premium charged for this cover.
- Consider reviewing your risks cover and leaving your movable goods at home where they will remain insured as part of your home contents cover.
- Don't insure small value items when you can afford to replace it yourself.
- Change address detail when you move to a new geographical area that may well be a lower risk.
Vehicles
- Research shows March is the month with the highest vehicle sales and if you're buying a new car with a balloon payment (residual), you'll owe your creditor far more than the price of replacing your car. To avoid the heartache of paying for a car you no longer drive, consider taking out credit shortfall insurance with residual to cover the gap between the market value of your vehicle and your outstanding debt on the vehicle.
- A vehicle warranty, service or maintenance plan will not cover you for any damage to your vehicle in the event of an accident. You would still need to ensure that you have an insurance policy to cover your vehicle against accidental loss or damage caused to your vehicle in the event of an accident.
- Ensure your vehicle is insured for its correct market value.
- If you think you drive less often, or better than the norm, consider a device that monitors driving behaviour.
"To prevent unforeseen damage and losses, it is further vital for households to get professional advice from their brokers in order to accurately ensure that potential risk situations are accounted for," Coutts concludes.
