Cancelling your insurance could prove to be a costly exercise

Households the world over are going through tough financial times because of the slowdown in the global economy and serious adjustments are being made by many, FNB Insurance Brokers (FNBIB) is urging consumers not to cancel their insurance policies because it could cost them a fortune.

South African households have not been spared the effects of the global economic meltdown. In a bid to make ends meet from one month to the next under the current climate some are cancelling their insurance policies.

Debbie Donaldson, Managing Director Personal Lines of FNBIB says cancelling a policy now could have serious financial ramifications in the long run.

“We are fully aware that many households are taking a great deal of financial strain from the prevailing economic conditions, but cancelling an insurance policy now would be ill advised. Yes, it will provide some relief in the short term, but should an accident strike you could find yourself in a dire position,” says Donaldson.

To illustrate why cancelling a policy is imprudent, Donaldson uses an example of a customer who loses essential home items with a market value of R200 000 from a fire or theft. Without Household contents insurance the client would be forced to self fund the replacement, which is all good and well should there be readily available funds. The situation could be worse if a client who has cancelled his motor insurance is involved in a car accident and is the guilty party. They will have to pay for own damages and those of other parties involved in the accident which could be substantial.

“The long-term costs of cancelling a policy could spiral and the households could easily see themselves forking hundreds of thousands of rands they don’t have,” she says.

Ways to reduce your insurance premiums:

1. Request a higher or voluntary excess. The excess amount is the first amount payable by you and will be deducted from any claims payment.In most cases a higher excess will reduce the monthly premium.
2. Forgo coverage you don’t need. Think about dropping comprehensive coverage on older cars with a low market value. Such coverage often is not worth it because any claim you make probably won’t exceed the cost of the insurance, but, ensure that you buy cover to protect you against damage and or liability claims to another party.
3. Purchase a low-profile car. It’s more expensive to insure a vehicle that is expensive to repair, popular with thieves or known for not having the greatest safety record.
4. Opt for safety add-ons. You can qualify for a discount on many policies if you have anti-theft devices such as a tracking device and an alarm system.
5. Combine policies with one Insurer. You may save money if you insure all your vehicles, including trailers, buildings and household contents, on a single policy.
6. Ask about other discounts. You also might be able to pay less if you’re older than 55 and/or retired; if you’ve had no accidents; or if you’re a longtime customer.
7. Make sure you get the best deal. Request your broker to evaluate your policy and check across insurers to make sure you’re paying the lowest overall amount.
8. Update the retail value of your vehicle. For vehicle insurance you can easily have your premium reduced if you re-asses the current retail value of your vehicle and adjust it accordingly
9. Approach your broker with a view to selecting specific household items you wish to cover which would give you peace of mind in the event of a catastrophe.
10. Review your home’s security and protections which will entitle you to a discounted premium.