Economic uncertainty is a good reason to go over your finances and tighten your belt. But, in times like these, insurance remains essential.
So, how do you prepare for tougher times but still make sure you’re covered?
Here are a few insurance tips for a tough economy:
1. Make Sure You Have Adequate Coverage
Many insurance clients get a nasty surprise when it turns out that the policy they’ve been paying for doesn’t cover a claim.
Much of this can be attributed to not getting a thorough understanding of the ins and outs of your plan.
Rather than assuming that your household content insurance covers floods and fire, go over its terms to make sure that it does.
Many policies require you to take out supplementary plans to ensure full coverage. For example, household contents coverage often doesn’t cover items lost or stolen while on your person.
Car insurance plans often only cover accidents and theft, but not vandalism or damage from protest action.
Expanding your coverage could raise your premiums, but could also be your saving grace in the event of a large claim.
2. Don’t Underinsure Yourself
To lower your premiums, you might be tempted to underinsure yourself. Some clients do this by understating the value of their assets.
This can easily come back to bite you. While you shouldn’t over-insure yourself, underinsuring can result in you receiving only a fraction of what you need.
Therefore, valuing your home at only R1-million when it is actually R2-million (excluding the land value), might mean you end up with a claim payout of only R800 000. This means you will fall well under what you need in the event of a disaster.
In the long term, underinsuring your assets will cost you a lot more than the money you saved on lower premiums.
3. Keep Your Assets’ Value Up-to-Date
As PSG Insure points out, the rand’s drop in value means that imported items are becoming more expensive to replace.
Since much of our premium products and electronics come from overseas, you’ll want to take their new prices on the South African market due to a weakened rand into account.
This links back to being underinsured – which can have costly consequences in the event of a claim.
4. Don’t Splurge On New Big Ticket Items
Now is not the time to go out and buy a brand new expensive car or holiday home.
Not only is the lending rate expected to rise later this year, increasing the interest due on any loans, but insurance premiums are expected to rise.
This is because the weakened rand’s effect on product prices means that insurers will have to pay more on repairs and claims. This is especially true when it comes to cars.
As a result, you can expect insurers to raise premium prices for all clients to cover the extra cost of claims.
We’ve reiterated how being under-insured will cost you in the long run, but you also don’t want to go adding expensive items to your assets, as they too will need to be insured.
Rather hold off on that new purchase until the economic outlook improves.
5. Protect Your Coverage By Cutting Other Expenses
While you shouldn’t be reducing necessary coverage in a tough economy, there are other expenses you can cut down on to cover the cost of your premiums.
This will protect your coverage by ensuring you have enough money for your insurance costs.
Look at luxuries which you don’t need – such as that daily coffee from Starbucks or takeout several times a week. Cut these down and you’ll be surprised at just how much you save.
You can also take a look at CompareGuru’s budgeting guide for more suggestions.
Budgeting will not only give you extra spending money, but will make sure that you don’t let your policies lapse due to non-payment.