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‘Inexpensive insurance’ mostly very costly.

01 July 2005 Arnold van der Linde

Everyone knows that insurance is necessary to lower your risks and to protect your valuable possessions. The question is, however, how to decide on a specific policy, broker or insurer.

“Hundreds of thousands of South Africans are led up the garden path by misrepresentations or fine print that aren’t pointed out to them beforehand,” says Arnold van der Linde, Managing Director of IntegriSure.

In practice, it boils down to the fact that many people buy shammed inexpensive insurance, only to be disillusioned at their first claim by an excess of a few thousand rands that is payable. In many cases the excess was either not pointed out to them, or they didn’t pay any attention to it when they took out their policies.

Van der Linde says people should specifically enquire about excesses and make sure that they read all about it on their policy documents. It happens every day that people realise with a shock that they are required to pay a large excess amount. Insurers sometimes have very intricate conditions i.r.o. Excess payments. You may, for instance, have to pay more when your vehicle is hijacked or in the event of a total loss.

If, for instance, the damage in case of an accident is R30 000, an excess of R3 000 instead of only R250 could cause a serious financial pinch to the insured. If that R3 000 is calculated over a twelve-month period, it effectively amounts to a premium increase of R229 per month.

“And then it often happens that people change brokers for a mere R30 per month,” Van der Linde says, “only to discover a few months later that the so-called saving had effectively cost them R229 per month.”

He says it could only be described as “a deferred shock premium”.

Before taking out “inexpensive” insurance, Van der Linde advises the public to ask certain questions and demand written proof about the following:

1. What will the excess be in the event of a claim?
2. What other conditions i.r.o. excess payments are there?
3. What cover is excluded? And above all –
4. Is the selling party a registered Professional Financial Services Provider who is committed to providing financial services advice, and a specialist in this field?

Van der Linde says it is equally important to study the product benefits and cover in detail, so as to ensure that you will, indeed, buy “total peace of mind”. Ultimately, that’s what insurance is all about.

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The second draft amendments to Regulation 28 will allow retirement funds to allocate up to 45% of their assets to SA infrastructure, with a further 10% for rest of Africa; but the equity & offshore caps remain unchanged. What are your thoughts on the proposal?

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