I strongly believe that one should, as far as possible, put measures in place to help protect and reduce risks in life. Not only in your personal and work life, but also in the financial part of your life.
Short-term insurance is one way of reducing your risks. It adds a form of safety and security to your life and that of your family, protecting you from unexpected events, like loss or damage to your valuable assets that can have potentially devastating impacts on your personal finances.
Although short-term insurance is viewed as a grudge purchase or expense by some, it should be considered by anyone who has valuable assets or items that they cannot afford to replace when disaster strikes. It can protect expensive items like your house, home contents, cars and the like as well as everyday items including laptops, cellphones, bicycles, etc.
Short-term insurance offers a safety net. It provides a measure of security if faced with unexpected events, whether it be manmade or natural occurrences. In recent times we have experienced devastating bush fires in the Knysna region and terrible floods in KZN. The loss as a result of these events have been astronomical, with people losing their whole livelihoods.
Insurance helps to manage your risk by covering and protecting your assets and valuables in the unfortunate event of damage, therefore, enabling you to save thousands of rands that would have been needed to replace the lost or damaged items. Not having protection in the form of insurance against this can have a profound impact on personal finances, even though having insurance takes money out of your pocket.
The potential benefit of having such risk mitigating measures in place is huge. For example, let’s say you pay R1 500 per month to protect your valuable assets, but it could cost you far more to replace expensive items and in some cases millions if something happens to your home. The recent KZN floods is a prime example of what can happen, and the losses associated with these events. Similarly, the loss of your vehicle, which is a common occurrence in South Africa due to crime levels and other socio-economic factors, can also have a huge monetary impact.
If you don’t have insurance in place, you need to save an amount equivalent to that of your valuables to replace them, and in most cases saving even huge amounts a month will not enable you to replace the loss due to the increased value of items and other factors affecting the value of an item or asset. Disaster can also strike more than once, and therefore you will never be able to know what amount will be enough to replace your valuables. For this reason, it is crucial to engage with your adviser to ensure you are firstly covered correctly and secondly that your portfolio of cover is reviewed correctly, at least annually. This will make sure that your valuables are still relevant and insured for the correct amount. A proper needs/risk analysis must be done to decide which risks you are exposed to and therefore decide which items must be insured and how. Your cover needs to be customised and applied in accordance with your personal risk, appetite, budget and requirements. Your adviser will assist you with this.
You need to know what you want to insure (what will have a huge impact on your life when these items are not there anymore) and then also consider what you want to insure it against, for example natural occurrences, theft, fire and so forth. You should also take into consideration how likely it is that damage or loss can occur for a specific item. You don’t need to insure everything. You can make a calculated decision and decide what items you want to insure against what type of damage. For instance, in case of a fire, the chances are that the loss can potentially be catastrophic, and the monetary impact can in some cases be irreversible. Therefore, you need to insure your house and home contents comprehensively at full replacement value. But minor damages, like losing a cellphone, will not have such a significant impact, and therefore may not need full cover when leaving the house. However, these decisions always need to be made considering your personal circumstances, financial position and needs.
Ask yourself whether you can live without that item, where you will stay if your house burns down, how will you commute if your car is stolen and whether you will have the financial means to replace the item. Ensure you put this safety net in place so that you can mitigate these risks and build a solid financial strategy by preventing potential financial losses that can derail your personal life or any business. Speak to a financial adviser to help ensure you select the right level of cover, tailored to your needs.
Almariè Büchner, Adviser at PSG Insure, Centurion
Affiliates of the PSG Konsult Group, a licensed controlling company, are authorised financial services providers. Visit www.psg.co.za for more information.
