Saving Money on Insurance

Who doesn’t like to save money wherever they can? Insurance is a grudge purchase for most people. We know we need it, but only see the benefit when it comes to claiming.

The word ‘insurance’ is very broad ranging from short-term insurance (car, home, household contents, business insurance, etc.) to long-term insurance (life cover, illness cover, and disability cover). There’s money to be saved all around.

Saving money on your short-term insurance

• Did you know that your credit history may impact the premium that you are changed? By maintaining a good credit history and paying your premiums on time you can ensure a healthy credit rating and the best premiums on your insurance.

Check your credit rating regularly through a website such as clearscore.co.za.

• When last have you revised your car insurance? Every year your car is worthless, but your insurance premium goes up. In many cases, we just accept the increase as part of the inflation, and this can lead to you paying far more than you need to.

It’s a highly competitive industry, so shop around every year to get comparative quotes and the best deal for you. You may be able to save a good few hundred Rand this way.

• Installing a tracking or anti-theft device may result in lower premiums on your car insurance. Check what the saving would be compared to the cost of installation to see if it’s worthwhile. Also, ask your insurer what type of anti-theft device would lower your premium.
• When shopping around for cheaper cover, be aware of the excesses in the event of claiming. Generally, the higher the excess, the lower the premium. Find a solution that works for you and understand the excesses that you would be liable for in the event of a claim.
• Some insurance policies have flashy bells and whistles added – extra benefits and cover that you will hardly ever use. None of this is free and built into the pricing so focus on the basics and pay for what you really need, not a stack of add-ons that you will never use.
• Consider bundling your insurance, so instead of taking out car insurance separately to household contents insurance, it may be cheaper to bundle them together with one insurer – see what options are available and how much you can save.
• Scrutinize your building insurance – if you own your own home and have a home loan, you will have building insurance. This may have been sold to you by the bank financing your home loan and added to your bond statement every month. This premium increases every year and again, by just accepting this, one could be wasting hundreds of Rands.

Shop around with other insurers as you do not have to take the building insurance out with the bank where you have your home loan account. I personally saved over R700 a month by doing this, after I realised that I was spending far too much on my building insurance.

Saving money on your long-term assurance 

• The longer you need life cover for, the more it costs, amongst other aspects. It is the most expensive to have cover for your entire life, and this may not make sense if you only need to have cover for a home loan, or while your children are young and dependent on you. Taking out life cover for a specific period of time is called term cover and if this is all you need, then this is what you should buy, whether it’s for 5, 10, or even 20 years. Paying for cover for your whole life if you don’t need it is a waste of money.
• Life changes and so do your financial needs. You may very well have too much cover, like a woman I encountered a while ago who took out R4m life cover as a single mother 20 years ago. Both her daughters are now married and she no longer needs the cover, but just kept paying for it. This premium could rather be invested to build up a nest egg for herself in her lifetime. Review your cover regularly and adjust as your life evolves and your circumstances change.
• Be careful of policies that claim to need little or no medical information. When you take out a policy, medical information is requested so that the insurer can underwrite you – this is a way of them assessing your risk and making sure that people who are healthy do not subsidize people who are less healthy – those with higher risks pay a higher premium for the same benefit. If you are healthy, it’s better to be underwritten and to disclose your full medical history. This can be far more cost-effective than going for a blanket policy where everyone is charged the same premium. Also by not smoking and keeping your health in check, you will also save a whack of money on premiums. Being a smoker or overweight can add as much as 50% extra to the cost of cover!
• Paying annually – this may save you money as well – check with your insurer.

Be cautious with cash backs

Cash backs – some policies offer cashback incentives after a number of years if you do not claim. This is not free – in rare cases, it’s automatically included, but generally, you will pay extra for it. Be very careful that this is actually worth the extra cost to you. If you stop paying on the policy, the extra money you have paid is lost. Also if you claim, there is no extra benefit, and you lose any money that you paid into the cashback benefit. Lastly, consider whether you could get a better return on the extra money that you are paying in. Work out how much extra you are paying and how much you will receive as a cashback bonus, to see what return you are being offered on this money. Generally, these funds are invested in very low return funds which are secure.

It’s all about being vigilant and proactive when it comes to your insurance decisions. Speak to your broker or financial planner and ask pertinent questions, shop around for comparative quotes, and save money.

What are your views on all things insurance gents?

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This article was written by Sylvia Walker, financial planner, speaker, and author of smartwoman. www.sylviawalker.co.za