All you need to know about Short-term Insurance

All you need to know about Short-term Insurance

Modern society requires the professional risk bearer, the insurer, to give a measure of certainty against the possibility of loss due to a contingency or unforeseen event. William Shakespeare’s expression in Sonnet 3: “All losses are restored and sorrows end”, gives an apt yet robust description of the public good that the short-term industry has brought to our society. Short-term insurance transfers risk from the generally risk averse public to the professional insurer thereby bringing peace of mind to the businessman and ordinary homeowner, alike, and makes the costs of daily life and conducting business more certain.

What is short-term insurance?
Short-term insurance is insurance that you take out on your possessions such as your house, car, cellular phone, furniture, etc. against loss due to events such as fire, burglary or damage. You can also buy short-term insurance to cover your health or disability events as well as a legal liability to others. The cost of insurance (premium) depends on what you are insuring and the value thereof. You pay a premium every month to buy you cover for that month. If you want to cancel your insurance, all you need to do is give a month’s notice to the insurer in writing.


You can also take out short-term insurance on a specific item, e.g. a DVD player, when buying it on hire purchase (HP). Most shops will not let you buy an expensive item, such as a lounge suite, on HP unless you already have insurance cover for the contents of your house, or buy insurance through the shop. The shop will often offer to arrange the insurance for you, but you do have a free choice and not have to buy the insurance through them. Always shop around for insurance cover that best suits your needs.


What is the purpose of short-term insurance?
The purpose of short-term insurance is to indemnify you against losses that you may suffer as a result of events such as accidents, crime, floods or fire. The purpose of short-term insurance is to place you in the same position you were before to the unforeseen event.


Tip: When you decide to insure your house, vehicle or belongings, work out how much it would cost to replace them. This is the amount you insure them for. E.g. if you insure your house for R600 000 and it burns down, you will not be paid out more than R600 000. If your vehicle is insured at market value, you can approach the insurer to adjust your premium accordingly. Make sure you are insured for the correct amount at all times-it is your responsibility!


What happens when you cancel your short-term insurance?
When you cancel a short-term insurance policy because you disposed of the insured item or no longer wish to insure it, your cover ends. You do not get a refund of premiums even if you have never claimed. The insurer was on risk all the time.

What are some of the different kinds of short-term insurances available in the market?
1. Homeowners’ Insurance
This is important insurance when you buy a house. It covers against loss if your house (the actual building) is damaged due to fire, wind, lightning, storm, water, etc. as well as the fixtures and fittings such as tiles, fitted carpets, etc. Your bank will insist that you buy homeowners’ insurance when you take out a bond. They can arrange it for you or you can buy it through a broker or directly from most insurance companies.

If your policy does not provide cover for subsidence and landslide or riot and strike, ask for that to be included. If there are other exclusions in your policy make sure you understand those exclusions.

Things to watch out for If you have a bond, homeowner’s insurance can be arranged by the bank. You are responsible for checking regularly that your house is insured for the correct replacement value. Remember, when you do not have a bond, or you have paid it off, insuring your property is your responsibility.


2. Household Contents Insurance
This insurance covers the contents of your home against damage caused by fire, storm, flood, theft, water leakage, accident, etc. Some insurance policies have exclusions and/or provide for an excess (the amount that you must pay in before the insurance company will pay your claim). Most short-term insurance policies that cover household contents require some sort of security system, e.g. burglar bars,
security gates or an alarm. Make sure that you know what your policy stipulates and install what is required, or the insurance company can refuse to payout when you claim.

Things to watch out for...

Make sure you value the contents of your home accurately. Value your goods on a new replacement value basis, which is how much it would cost you to buy the same (or equivalent) item. Sometimes, people think they will save on their premiums by only calculating the value of things they think are most likely to be stolen. This is unwise!
If you do not value the contents of your home properly you could be under-insured - and if you need to claim, you will not receive the full amount of you claim because of the under-insurance. Ensure that you have adequate cover and adjust it regularly.


3. All Risks Insurance
There are some possessions which we normally carry with us and which may be lost outside the home, e.g. cellular phones, cameras, sunglasses and bicycles. Most household contents policies offer an all risks section to cover these items, but specific items may not be covered unless they are individually listed in the policy together with their insured values. Check with your intermediary (insurance broker) whether your insurance includes this type of cover.


4. Motor Insurance
There are different types of motor vehicle insurance. You need to make sure that you value your vehicle properly when you take out insurance. The value affects not only your premium, but also your claim. Unlike household contents, the value of a motor vehicle decreases every year and is mainly determined by market forces, in other words, how much you could get if you sold it. The rate at which it devalues is also affected by things like kilometres travelled and maintenance of the vehicle.


It is therefore important to adjust the insured value every year so that it is accurate. If you fail to do this your vehicle will be over-insured and you could be paying too much premium as a result – enquire from the insurance company or intermediary.

Factors affecting your motor insurance or premium
• The insured - your premium and cover take into account your personal circumstances such as age, claims history, etc.
• The type of vehicle - the premium and cover can be influenced by the type of vehicle, e.g. the year, make, model and value.
• The security fitted to your vehicle - check whether the security you have fitted is acceptable to your insurer.
• Where you live - insurance claims are more frequent in certain areas due to higher risk factors.
• The place where the vehicle is kept, especially overnight - chances of theft are lower if your vehicle is locked and parked in a lockup garage.
• What you use the vehicle for - is it for driving to work and back, private use or for business purposes?
Inform your intermediary (broker) or insurer if anyone else will be driving the vehicle.

Different types of motor insurance

4.1 Third Party 
If you have an accident and you are responsible, your third party insurance covers injuries to other people (including passengers) as well as damage to other people’s property. Should a passenger be injured as a
result of your negligence, the insurance company will cover his/her injuries too, over and above the Road Accident Fund benefit limit.

4.2 Third Party Fire and Theft
This insurance provides cover for fire and theft, in addition to ordinary third party cover. You may be required to pay an excess – please read your policy document.

4.3 Comprehensive
Comprehensive insurance provides cover for damage to your own vehicle combined with third party, fire and theft cover. This gives you the broadest possible cover. You usually have to pay an excess.

5. Legal Liability Insurance
This insurance indemnifies you against claims made against you personally, usually for negligence of some kind or another. For instance, someone may trip on a loose tile on your front steps and suffer severe injuries, and take you to court to claim for medical expenses, loss of income, etc. As soon as you are aware of an event that has occurred that might lead to a legal claim against you, it is important that you notify your insurer immediately.

Note: 
A certain amount of “legal liability cover” is usually included in your household contents insurance policy!
One last thing you need to know about short-term insurance 
One last you need to know about short-term insurance
It is important to note that you cannot claim from more than one short-term insurer for damage to the same asset.

Your Rights and Responsibilities as a consumer of short-term insurance

Rights

  • It is your right to get a detailed contract from the insurance company within 30 days. The contract must tell you exactly what you are covered for and what you are not covered for.
  • The contract must also give you the telephone numbers and the physical and postal addresses of the insurance company or your insurance broker that sold the product to you.
  • Your contract must tell you the exact premium you must pay every month.
  • It must also tell you on which day of the month that amount must be paid.
  • The contract must also tell you how this monthly payment could go up in the future.
  • It is your right to know what the grace period is. You normally have a 15-day grace period for late payment. For instance, if you have to pay by the 1st of each month, you are actually allowed 15 more days for the premium to be paid.
  • The contract must explain any special conditions that your insurance policy may have. It is also your right to know what you are not covered against under your insurance policy that you have taken out. This is called “exclusions” in your policy document.
  • You also have the right to know the amount that you must pay in before a company will pay your claim. That amount is called the excess.
  • You have the right to cancel an insurance contract within 30 days after you have signed the contract and you are not happy with it. This is called a "cooling-off" period in your contract.
  • It is you right to know how to make a claim. Your contract will tell you how the company's claims process works.
  • The contract must also give you the telephone and fax numbers, physical and e-mail addresses of the Ombudsman for Short-term Insurance. This is the office where you go and complain if your insurance company or broker cannot resolve your complaint

Responsibilities

  • You have the responsibility to sure that you only ever deal with insurance companies that are registered with the FSB. Make sure that the insurance broker you are dealing with is recognised by the insurance company he/she represents.
  • You have the responsibility to read through your contract documents and understand everything. Ask your broker if there is anything that you don't understand. If you still don't understand, get someone to explain everything to you in your own language. You also have the responsibility to insist on having your documents written in clear and simple language.
  • Do not sign any blank or partially completed application forms. Complete all forms in ink.
  • Make sure you understand what is said to you and what you agreed on is confirmed in writing within 30 days. It is your responsibility to keep your contract in a safe place.
  • You have the responsibility to give true and correct information about yourself. You may experience problems with your claims if it is found that some of the information is untrue.
  • You are responsible to make sure that you pay your insurance every month. Remember, you will not be covered if the premium is not paid!
  • Make sure that you know exactly how much the policy will cost each month and to include it in your monthly budget.

 

Contacts details of institutions relating to Short-term Insurance products and services:
The Ombudsman for Short-Term
Insurance
PO Box 32334, BRAAMFONTEIN, 2017
Tel: (011) 726 8900
Fax: (011) 726 5501
E-mail: 


The SA Insurance Association (SAIA)
Box 30619, BRAAMFONTEIN, 2017
Tel: (011) 726 5381; Fax: (011) 726 5351
E-mail:
Website: www.saia.co.za

The Ombud for Financial Services
Providers (FAIS Ombud)
PO Box 74571, LYNWOOD RIDGE, 0040
Tel: 0860 324 766
Fax: (011) 348 3447
E-mail:

The Financial Services Board (FSB)
PO Box 35655, MENLO PARK, 0102
Physical address: Riverwalk Office Park, Block
B, 41 Matroosberg Road, Ashlea Gardens
Ext 6, MENLO PARK, 0081
Toll-free: 0800 20 20 87 or 0800 11 04 43
E-mail:
Website: www.fsb.co.za

This content was issued as a newsletter by the TTHE FINANCIAL SERVICES BOARD

Faq Accordion

  • Why you need an Asset Valuation

    Fully motivated reports will assist you in determining the underlying value of your assets for a range of purposes
  • What does a valuation cost?

    Valuation varies depending on the type of property and it's location
  • What is the difference between SA's Council for the Property Valuers Profession & Institute of Valuers

    The Institute is a voluntary association the Council is a statutory body dealing with the compulsory registration
  • In which areas do you do valuations?

    Across South Africa and a typical valuation takes about 3 days

Newsletter

Pendio Valuators operate as a specialist team of accredited professionals through a diversified network of branches across South Africa. If you want monthly info of Valuating News in SA - please sign in

Menu