In tough times the temptation to cut spending, especially on insurance costs, can become overwhelming. As the budget squeezes, insurance is usually the first casualty. Maintaining essential cover in tough times, however, can save money and avoid unforeseen losses, especially when there is simply no more cash in the kitty.
We live in a time of plummeting national income, increased administration costs, and every likelihood of an increased individual tax burden. In these tough times, just as the Finance Minister is taking a good, hard look at Namibia’s spending priorities, individual policyholders are encouraged to do the same with their insurance premiums.
Despite the pressure to dump insurance altogether when cash is scarce, the right cover matters most
Knowing which insurance covers are essential, and how much to be allocated to these essentials, is the essence of personal risk management, “an important life skill, central to building and maintaining long-term prosperity,” says Andries Lombard, Underwriting Manager at Old Mutual Short-Term Insurance.
Fortunately, there is a highly-developed industry out there providing many tools to help consumers manage, and price, their risks correctly.
Don’t settle for the first insurance cover your see
Namibia’s insurance industry is very competitive, so “shop around,” advises Lombard. Most insurers provide a lot of detail about various covers available on their websites. They also have an extensive network of intermediaries to advise and explain suitable cover.
In today’s market, consumers can literally personalise their cover to suit their exact risks and pockets.
Brokers are a great resource
Namibia has a highly developed and professional insurance brokerage community that are very helpful when it comes to shopping around. Let them do the heavy lifting.
“Brokers know the industry and are experienced in interrogating your specific circumstances and risks, then matching the right cover to your budget,” advises Lombard.
Avoid rejected claims
Brokers are especially helpful when it comes to minimising the risk of claims being rejected.
One of the biggest drivers of claim rejections is poor research and product knowledge. Consumers regularly purchase covers that don’t apply to their circumstances or only payout on conditions that they don’t meet.
“Brokers are very good at evaluating an individual’s specific circumstances, matching cover to their real risks, and minimising the chances of claims rejection,” explains Lombard.
Obey the rules
If cover requires the policyholder to be sober when driving, drive within the lawful speed limits, have a burglar alarm or appointed security response company, have fire hydrants or a lightning conductor as a precondition, make sure you understand these conditions and then don’t ignore the rules.
Policyholders regularly only discover the detail of their policy when their claims are rejected.
“Don’t waste precious cash paying for cover that you won’t get because you either didn’t understand the conditions or ignored them,” cautions Lombard.
Don’t claim for everything all the time
Insurers look at both the cost and the frequency of claims.
If you have not claimed for a number of years, you will attract a lower premium. Insurance is there to help consumers manage the sudden and unforeseen crises that can cripple them financially.
Regular and high-value claims will result in an increased premium and will, over the long term, cost more than covering the occasional small incidental damages or losses yourself.
Maintenance is king
A lot of claims are rejected when customers have not adequately maintained their properties or vehicles.
“Insurance is not a maintenance plan,” says Lombard.
Consumers should maintain their property at all times, to prevent claims from being rejected as a result of wear and tear or poor maintenance. It is always a contractual requirement for a consumer to apply a duty of care in managing their insured risks.
Restructure your insurance cover when cash is tight
Taking on a higher voluntary excess can reduce monthly premiums in tough times.
Reducing cover to third party and theft only, can substantially reduce the premium of comprehensive packages whilst still enjoying substantial cover.
Update your insurance cover at least once a year
As the content and value of your possessions change, as things break, get lost or are replaced, be sure that the detail and the value of your household contents are correctly indicated on your inventory sheet and covered accordingly on your policy. Consumers who do not update their contents and its values regularly, often pay unnecessary premiums, either on possessions they do not have or at inflated valuations.
The golden rule
Never cancel any covers where you have financing in place.
It is essential to maintain cover on homes and vehicles that are still being paid off. Consumers should never get into a position where they are stuck paying off a destroyed home or stolen vehicle, even though they have neither.
Personal risk management is about constantly updating and tweaking your insurance portfolio to meet your evolving life, risks and personal income circumstances. There are many tools, systems and people out there to assist consumers to manage this process and to learn.
Namibia has a “highly-competitive insurance industry equipped to guide consumers to the cover that they need at a price they can afford,” says Lombard. Consumers should call on these resources to reduce their insurance spend or up their cover in tough times rather than “exposing themselves to adverse risk events and potentially even more expenses when they can least afford it,” he concludes.