Short-term insurance speak made easy
Just think about the financial nightmare if your home was destroyed in a fire, your possessions stolen or your car smashed in an accident. Short-term insurance provides the peace of mind of not having to dip too deeply into your own pocket when you suffer damage or loss of your property.
In a nutshell, insurance means the transfer of risk. By paying a monthly sum to an insurance company, you are handing over the risk of having to repair or replace your possessions at your own cost. But let’s face it, your eyes glaze over when you’re faced with ploughing through pages of jargon in the contract. When it comes to your short-term insurance policies there are a few words and concepts worth understanding.
What is short-term insurance?
As opposed to long-term insurance (which generally means insuring the life of a person), short-term insurance covers either the loss of a specific item or against a particular event over a period of time. Short-term insurance is flexible and can change as your circumstances change.
What is a premium?
This is the monthly payment to your insurance company for the assets covered. It usually increases on an annual basis. Your insurance company uses a number of criteria to determine your monthly premium based on the precautions you have taken to protect your possessions. Take your car, for instance, you can reduce your premiums by fitting a tracking device and alarm.
What is an excess?
This is the amount not covered by your policy that you will have to pay towards the loss or damage to your property. The excess amount is usually stipulated in your contract, and your insurance company cannot change it without your knowledge. You can lower your excess by increasing your monthly premiums. (Find out more about excess payments here.)
What is personal liability cover?
This is insurance that covers a third-party suing you in your personal capacity for financial loss, injury or death. These claims can be extended to legal costs, medical expenses, loss of income, pain and suffering and restoring damaged property. Personal liability covers claims of between R2-million and R5-million, and is normally integrated in your household, home owner and even your car insurance. Given that medical and legal costs can quickly add up to much more, you may benefit from a top-up option on your personal liability cover.
What are exclusions?
Your policy will include a list of conditions where the insurance company won’t pay out for your damages or loss. For example: you live in an area prone to flooding, then your insurance company may exclude paying for damage caused by a flood from your policy to minimise their risk.
What protection do I have as a consumer?
The short-term insurance industry is governed by legislation, in this case the Short-Term Insurance Act. The act prescribes exactly how the industry may operate. In addition, if you make a claim and it is refused by your insurance company, you have recourse through the short-term insurance Ombudsman (www.osti.co.za). This body will evaluate the dispute and make a finding. If the finding is in your favour, your insurance company is obliged to pay out your claim. Short-term insurance may seem like a tangle of red tape. By working with your insurance company or broker and understanding all the ins and outs, you can come up with an option that suits your lifestyle needs and protects you from a devastating financial loss.
By Nicci Botha
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