As July is National Savings Month, it’s a time to reflect on your budget looking at where you are spending and where you could save more. Thinking you can cut costs on your insurance, however, is a potentially common misconception. “If you aren’t covered sufficiently in favour of paying cheaper premiums, your costs at claim stage could be quite frightening,” says Bertus Visser, Chief Executive of Distribution at PSG Insure. “And your budget can be completely blown.”
Here are three ways you might think you can save along with what the reality could be if you decide to take these saving risks.
Opting against value-added cover like car hire
Your monthly premium can be cheaper if you don’t add extras like car hire to your car insurance. This covers you should you have an accident and while your car is in for repairs, your insurer provides you with a car to use. Almost gone are the days of panel beaters supplying courtesy cars, so if you don’t have ways and means of getting around without your vehicle for a few weeks, travel arrangements could be inconvenient and costly if you skimp on this cover.
“Some European cars can also require months to repair while replacement parts are imported into the country, which can mean you will be without transport for a very long time,” says Visser. Traditionally car hire cover is for one month. If you do have an imported car, you may even consider extending your car hire cover for up to three months. “Think about the costs for alternative transport from inconvenience to actual expense and decide if not having car hire cover is really worth the small saving on your premium.”
Rethinking the way you specify items
You do not need to specify jewellery, for example, under All Risk if you do not wear that item on your person at all times. It may work out cheaper to include some items as part of your contents insurance, which means you will have factored in replacing that item as part of your overall contents cover.
“A good example of an item like this could be a tablet – you might have one you only use at home, so it doesn’t need to be covered when you are out and about,” Visser adds. If, however, the item/s you have in mind are particularly valuable and you are unsure if they should rather be specified, check with your adviser before including them in your general contents cover.
Underinsuring and over insuring your contents
Contents insurance is the one place where we generally try to save. “Remember though, if you have underinsured your contents, a claim may be repudiated or will only pay out proportionately,” Visser says. What this means is that if your contents value is actually closer to R1 million and you have only insured for R250 000, your insurer may only pay out 25% of R250 000.
On the flip side, if you over insure, your premiums will be unnecessarily high. “You must get an accurate idea of what it would cost to replace everything in your home if you were to have a fire or flood. You must also keep the Rand in mind as to how it will affect the replacement value of imported household items and fittings,” he says.
If you are looking for practical ways to save safely, consider adjusting your sum insured value on your car insurance periodically. “As cars devalue, you could effectively have your premiums reduced too if you keep your sum insured value up to date,” says Visser.
It is of course most common that your various insurance policies are housed under the same insurer. “The more products on a policy, the cheaper the premiums are. It is much more cost-effective to have everything from your car to your contents in one place,” Visser concludes.