Short-Term Insurance, What Is it And Do I Really Need It?

When you buy insurance in South Africa chances are that it will either be long-term insurance, which deals with insuring yourself (ie: life insurance), or short-term insurance. We're going to focus on short-term insurance, which some people are not sure of but which nearly every person actually needs!

If you own anything of value then you need short-term insurance. The most popular possessions that people purchase short-term insurance policies to protect include their vehicle, their home, and the valuable contents inside that home.

It is a terrible idea to own a car or a home without a short-term insurance policy as back-up in the event of an unexpected calamity. If your home is flooded and your car is stolen it is never something you think can happen to you, but fortunately insurance companies always expect the worst and will have provided for these horrible occurrences. For most people the possibility of replacing their car or valuables without insurance is remote and in a lot of cases simply non-existent.

When you buy short-term insurance the insurer assumes that risk on your behalf and charges you a nominal monthly sum for bearing that risk. This amount is known as the premium. The premium will differ from one insurance policy to the next. The amount you are charged depends on several factors including your personal history, your age, where you live, the value of the items you are insuring, and the company that underwites the policy. New insurance companies like OUTsurance and Dial Direct have changed the South African insurance industry by dealing directly with their clients, as opposed to using brokers, and the results are frequently cheaper policies.

The greater the risk in insuring you (say if you are a young driver with a string of traffic cautions already under your belt) the higher your premiums are going to be. Similary, if you want to insure a brand-new Porsche that is a rare model and tough to replace your monthly premiums are going to be a lot higher than if you wish to insure your grandmother's Toyota.

If you have short-term insurance and your car is involved in an accident or your house is robbed then the insurance company will either pay you out or replace what you have lost, enabling you to carry on with your life. Short-term insurance policies also require you to pay an excess whenever you make a claim. This is to stop people from claiming all the time and fraudulently trying to get money or goods from an insurance company. The more times you claim the higher your excess and premiums become, because insurance companies start to think of you as a bad risk.