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As South Africans face increasing financial pressure in the current economic climate, some may be considering cutting back or stopping monthly insurance premiums to try save on expenses. However, this is a big mistake as it leaves them exposed to greater financial risk in the future and they should rather discuss their options with their broker or insurance provider.
This is according to Nazeer Hoosen, Executive: PPS Short Term Insurance, who says it is best not to miss a premium payment as one runs the risk of the insurance policy lapsing. “If a consumer fails to pay their outstanding premiums within the prescribed grace period stipulated in their policy, their insurance cover will very likely expire effective the date of their last premium payment.”
He notes that if the policyholder decides to re-instate their cover a few months later, they might be required to take out a new policy. “The monthly premiums may well increase with the inception of a new policy. It is best to contact one’s broker or insurance provider to see if the premiums can be negotiated or some aspects of the cover can be amended, which will not leave the policyholder at risk.”
“Consumers should also pay special attention to the type of cover they are purchasing versus the premium they are paying. Especially when the person’s focus is to obtain cheap insurance. It is important that consumers consider the cover, excesses, extensions, exclusions, claims paying capability and service levels of the organization, before settling for cheap monthly premiums,” advises Hoosen.
There are various factors which are taken into consideration when insurers determine a client’s insurance premium, he says. “Therefore consumers should also consider updating their short-term insurance policies to make sure all the information in the policy accurately reflects their current situation and that they are paying for the right amount of cover that they need.”
As an example, Hoosen says that if the insured’s car is now parked in a locked garage or behind a secure gate where it was previously parked overnight unprotected in the street, the vehicle will be considered as a lower risk for theft and damage and therefore the motorist could possibly pay a reduced premium. When it comes to home insurance, should the homeowner install alarm systems and/ or CCTV cameras on the property, they could possibly lower their monthly premium as the house is now at a reduced risk for house burglaries and robberies, however the rules often vary depending on the type of cover the consumer has in place.
Hoosen does not advise people to cancel their short term insurance policy as they will be greatly exposed to risk of financial loss as they won’t be able to file a claim during this period. “Rather speak to your broker about the possibilities of amending cover and making premiums more affordable at a time of financial pressure,” he concludes.