Content trumps candy when buying insurance

Insurance is about having your real risks covered at an affordable price – not about cash-backs, payouts, prizes or freebies.

“Every person should work out what they can reasonably afford to replace or pay in the event of loss or accident – and then insure only those things which will seriously compromise their financial well-being if lost or damaged” says Gari Dombo, Managing Director, Alexander Forbes Insurance. This will keep the insurance bill to a minimum while making sure that a major loss, like losing a breadwinner, a home or a car, will not compromise the financial well-being - or future - of an individual or family.

In other words, simplicity is key. Don’t be fooled into paying for stuff that you don’t need or want.

Often, many of the add-on’s that are used to market insurance appear useful. These, however, come at a price – usually a higher premium or less cover. In life there is no such thing as a free lunch. If an insurer is giving things away or awarding prizes, “believe me, this is built in, or added to, the premium - or funded by reducing the scope of the cover” says Dombo.

Consumers should rather save the additional money, using it to choose and buy what they want and need, “rather than having an insurer give you free stuff that you don’t need” adds Dombo.

Moreover, these kinds of pay-backs and prizes are also notoriously difficult to actually qualify for. As such, consumers are warned to read the exclusions clauses carefully before signing up.

Instead, consumers should at all times work to keep their insurance bill to a minimum by properly understanding which events or occurrences would seriously compromise their ability to fund their lifestyles and save for the future. Only these need be covered. Mobile phones, music systems, furniture and clothing can all be replaced relatively inexpensively over time.

Most people, on the other hand, can’t afford to replace their homes or cars - or pay for a major health event. As such, these should be meticulously insured at their full replacement or remedy value, “regardless of whether you get free fuel, cash back, or discounts at the local supermarket” concludes Dombo.