An Introduction to Short-Term Insurance
Insurance is often seen as a “grudge purchase,” but it is the primary shield protecting you from devastating financial loss.
A Two-Way Agreement
Insurance is a legally binding contract. To ensure your cover remains valid, full disclosure is mandatory. You must inform your insurer of:
- Full claims history.
- The ages and details of regular vehicle drivers.
- Whether an insurer has previously cancelled or declined a policy for you.
Core Coverage Areas
🚗 Motor Insurance
With 70% of SA vehicles uninsured, you risk total financial loss or liability for third-party damages without cover.
🏠 Buildings Cover
Protects the physical structure. Essential to disclose roof and wall construction (e.g., thatch vs. tile) for correct rating.
🛋️ Household Contents
Covers everything that would “fall out” if you turned your house upside down. Use an inventory list to avoid under-insuring.
📱 All Risks
Covers portable items removed from the home, such as cellphones, laptops, and smartwatches.
Understanding “Average”
If you insure your property for less than its actual replacement value, insurers apply the Condition of Average to claims.
Calculation Example:
$$ \text{Settlement} = \left( \frac{\text{Sum Insured}}{\text{Value at Risk}} \right) \times \text{Value of Claim} $$
If a house worth R300,000 is only insured for R200,000, a R60,000 fire claim will only pay out R40,000. You are effectively your own insurer for the remaining R20,000.
The Cost of Convenience
Don’t base your decision solely on the cheapest premium. Ensure the policy fits your needs and includes Roadside and Home Assistance for emergencies like burst geysers.
You cannot afford NOT to have insurance.
Is your sum insured up to date?
Profile: Gisela Budler CFP®
Lecturer in Financial Planning and Insurance at Milpark Business School. Specialist in Risk Management and Insurance Operations.
