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Shining a spotlight on savings

14 July 2014 Rudolf Britz, Momentum STI
Rudolf Britz, chief actuary at Momentum Short-term Insurance.

Rudolf Britz, chief actuary at Momentum Short-term Insurance.

Let’s face it, short-term insurance is a grudge purchase and is often forfeited to save money. The team at Momentum Short-term Insurance is taking Savings Month seriously and is committed to showing you how to save money despite advocating spending some of it on insurance.

In exchange for a monthly premium, short-term insurance companies will cover your car, building, contents, bicycle, and watercraft (watersports items). In return, this offers you stability and peace of mind, knowing that if anything goes wrong you are on the safe side.

Rudolf Britz, chief actuary at Momentum Short-term Insurance, says the most important thing is that spending money on short-term insurance will save you in the long run. “A small monthly premium is going to be worth it if you compare that with the enormous capital outlay to replace your assets completely.”

For example, if your car is worth R100 000 your premium will be approximately R400 per month. If you have decided not to insure your car and it is stolen you will need to find R100 000 to replace it. You also need to seriously consider the interest you will have to pay on the money if you need to borrow it from the bank.

So how exactly can you save money on your short-term insurance?

• Make sure you have the right amount of cover on existing items. Don’t insure your ski boat for R120 000 if the book value is only R100 000.
• There is normally an option to increase your excess (the amount you pay should you claim) to reduce your monthly premium.
• Check if your policy includes optional extras, such as car hire should your car be stolen. By not opting for these extras it can decrease your monthly premium.
• Ensure that your laptop is not doubly insured. If your employer is covering it then it is not necessary for you to do so.
• Consider not insuring items that only have sentimental value as insurance is designed to replace assets and not sentiment.

What to insure

Make a list of your assets, then split them into ‘critical’, ‘secondary’, and ‘least critical’. Making the critical list should be your assets that are critical to your lifestyle. For example, if you need your car to get to work, then your car will make the critical list. On your secondary list could be an antique dinner service. On your least critical list, you could include the contents of your storeroom that you probably wouldn’t notice too much if they were stolen. To save some money on your premium, you could choose only to cover your critical list.

Shopping for the best deal

Cheap cover is often expensive cover explains Britz, “If you’re offered a cheap premium be aware that your future premium could increase dramatically after a certain period. Adding to that, if you claim then your premiums can skyrocket, too.”

When comparing one company to another you should always look out for the following measurement tools: one, being the company’s complaints ratio, and two being their overturn ratio held by the Ombudsman for Short-term Insurance (OSTI). The overturn ratio refers to the frequency with which the OSTI rules that a decision made by the insurer is unfair, and hence turns the decision in favour of the policyholder. Both metrics are easy enough to come by.

Momentum Short-term Insurance’s numbers are sitting at three complaints per 1 000 claims getting to the OSTI and 10.3% of these complaints overturned in favour of the insured (for the calendar year 2013). The industry average numbers are three and 33% respectively, so Mometum Short-term Insurance compares really well here.

How to choose an insurance company from amoung many:

• Always choose a reputable company
• Ensure you are comparing apples with apples when stacking competitors against one another. If need be, approach a broker to explain the cover as it should to be clearly understood in great detail
• Browse Hellopeter and look for a trend – what are people saying about the company? How many complaints are there? Look at the percentage of complaints that get turned into compliments

Britz concludes that everyone is unique in terms of their insurance needs and when shopping around for the right cover, one should consider that an insurance company needs to specifically design and perfectly tailor their products to suit each persons requirements. Whatever your requirements, there’s an insurance company suited to your needs.

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