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
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.