One of the ways that people can cut unnecessary expenditures from their lives is to review their insurance policies. Picture: Freepik
The beginning of the new year is a time when most South African consumers are struggling financially due to festive overspending, back-to-school expenses, and the long wait until payday.
According to Santam’s Insurance Barometer report released at the end of 2023, 88% of consumers were already making adjustments to their spending as the cost of living increased.
This means that consumers need to find ways to cut unnecessary expenditures, and one way that they can do that is to review their short-term insurance contracts.
Thabo Twalo, Chief Underwriting Officer at Santam Broker Solutions, said that reviewing your insurance policy may even help you save some money in the long run.
Here are five ways you can clean up your insurance policy and save money.
Adjust the amount you are insured for
According to Twalo, the primary reason that people review their insurance policies is to ensure that they are insured for the right amount. This is what insurers call the "sum insured" or "limit of indemnity".
Purchasing new items means that you will need to adjust the contents of your home insurance cover or specify some items. Perhaps the value of your car has depreciated. You can ask your insurer to lower the premium you pay accordingly if your provider has not automatically done this for you.
Take off items from your policy that are sold or that are no longer in use, such as old cellphones or laptops.
“It is also helpful to weigh up the excess/ first amount payable against the value of the items insured to ensure that this is the correct amount,” Twalo said.
Underinsurance
The value of the goods insured should equal what it would cost to replace them today and the original price that you paid when you purchased them.
Often, goods remain insured for their original value instead of what their current value would be. For example, a leather couch bought 10 years ago would be insured for R6,000, but to replace the couch, it might cost R20,000 today.
This is why insurers usually automatically adjust the sum insured each year to keep pace with inflation.
This also depends on whether the original sum insured was the true replacement amount at the beginning of the policy.
People should review these amounts on a regular basis to avoid underinsurance at the time of a claim.
The structure of your home
Twalo said that if people have enhanced the value of their homes by adding solar panels, redoing their kitchen, or installing a swimming pool, they will need to increase the amount that their house is insured for.
Your house (its structure) and your belongings (home contents) must be insured at their replacement value, that is, what it will cost you at the time of a claim to replace/rebuild your home or belongings with similar, new structures or items.
Your car
People need to ensure that their cars are insured at a "reasonable market value".
Reasonable market value is the retail value, which is what a dealer would sell it for, considering its age, the mileage, the condition of the car, and any extras.
If you’re wondering what your car is worth, contact your broker or your insurer if you don’t have a broker to work out the reasonable market value of your car.
Saving
If your daily driving routines have significantly changed due to changed working conditions, such as working from home or changing jobs, then you should speak to your insurer about recalculating your insurance premium because you are cutting down on the amount of time spent on the roads.
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