Short-term insurance with its numerous conditions, exceptions and limitations is far more complex than what most people appreciate.
Consider what would happen if…
- You had to replace your dinner table insured 10 years ago for R6 000, but now costs R14000.
- You lost that fancy watch worth R75 000, but didn’t specify it under your all-risk policy and the insurer only pays out R20 000.
- Your friend writes off your R250 000 car in an accident, but your policy doesn’t cover multiple drivers.
- If your personal liability cover is for R2 million, but you get sued for R10 million.
Financial disaster could happen in an instant.
There are some common pitfalls that everyone should look out for in the terms and conditions of a short-term insurance policy.
What if that R1 million diamond bracelet your inherited from your grandmother gets stolen, but you insured it for only R500 000 ten years ago?
It is not unusual to keep goods insured at the original purchase price, not its current replacement value.
Although your premiums will increase with a higher replacement value, it could save you a fortune in the future to keep up-to-date with current market values.
If you rent out your property for the 10-day school holidays and the person renting from you makes off with your R1 million painting, you will not be covered.
There are some key limitations relating to burglary that homeowners should be aware of.
Burglary would not be covered should your insured property be loaned out, sub-let, unless there are visible proof of forcible entry.
If you crash your car and it costs R50 000 to repair, you might only get R45 000 (90%) from your insurer.
The excess amount is the money you as the client pay upfront towards repairs and replacements.
Most short-term policies include excess payments and this is explicitly stated in the policy document.
To avoid a nasty shock, you should read this section carefully for all sections of your policy.
4. Loss of money
What if you had R10 000 cash in your safe at home and you get burgled?
Most short-term policies only offer limited cover of R2 500 for loss of cash.
Amounts higher than R2 500 must be insured separately and explicitly dealt with.
5. Personal liability
If you were responsible even accidentally for someone’s death, you could be sued for anything up to R10 million.
Personal liability covers you against someone suing you in your personal capacity for financial loss, injury or death.
A standard personal liability cover is between R2 million and R5 million.
Not having sufficient cover here could lead to financial ruin.
6. Car insurance and exclusions
Your friend writes off your R250 000 car in an accident, but your policy doesn’t cover multiple drivers.
Are you aware of all the exclusions your short-term policy have? This is especially relevant with car insurance.
How roadworthy are your tyres? Does your policy cover multiple drivers. Did you declare the use of your car for business use?
If you answered no for any of these questions that fancy car might not be replaced under your current short-term insurance policy.
Read the small print
Unclear fine print and confusing terms and conditions often lead to low payments or no payments from insurance companies.
If you are not properly insured you could pay R1 000 less a month, but if something happens at home, you could lose R1 million.
It is not uncommon for “small print” changes to be made by insurance companies without explicitly informing customers.
Seeing that short-term insurance is a contract between you and an insurance company, actually reading the contract is something you should do.
Contact your insurance broker to explain not only the benefits of your short-term insurance policy, but also all the finer detail.
* This article is informational and educational and should not be used or relied on as financial or professional advice. No liability can be accepted for any errors or omissions nor for any loss from reliance upon any information herein.