IOL Money Digimag - May 2021

MONEY MAY 2021

SHORT-TERM INSURANCE | Freepik.com

IOL

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CONTENTS FEATURES The 5 main types of personal lines insurance Living together? How to insure your belongings Why we are paying for uninsured drivers

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You may prefer insuring individual items instead of your home contents

10 Microinsurance is ready to disrupt the Africa’s insurance industry

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REGULARS Rands and Sense with Bertus Visser

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Fact File: The Ombudsman for Short-Term Insurance 13 Money Basics with Martin Hesse: Insurance terms you need to know

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Money Quiz 18 Planning Perspectives with Palesa Tlholoe

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Important contacts and links

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FROM THE EDITOR

The duty of planning tomorrow’s work is today’s duty; though its material is borrowed from the future, the duty, like all duties, is in the present.

– C.S. LEWIS

British writer and lay theologian

CONTACT US PUBLISHER Vasantha Angamuthu vasantha@africannewsagency.com MONEY EDITOR Martin Hesse martin.hesse@inl.co.za DESIGN Mallory Munien mallory.munien@inl.co.za PRODUCTION Renata Ford renata.ford@inl.co.za BUSINESS DEVELOPMENT Keshni Odayan keshni.odayan@inl.co.za SALES Charl Reineke charl@africannewsagency.com ENQUIRIES info@anapublishing.com

PAYING premiums each month to insure one’s possessions is something most people do grudgingly.

However, you could liken it to putting aside a set amount monthly to play the lottery – the chances are that you will never benefit, but if you do, your reward will be worth more than all you paid in.

Of course, the probability of needing to claim from your insurance company after being involved in a car accident or having your house burgled is high in South Africa – immeasurably higher than choosing the winning numbers in the lottery.

A worse scenario would be if you did something to result in the insurance company repudiating your claim. If you are going to the expense of paying those premiums each month, you need to make sure you have done all you can from your side to be honest and open with your insurer and that you know and adhere to the terms and conditions of the contract.

It’s also up to your broker or adviser (or a telephonic consultant, if you are buying insurance directly) to ensure you are fully aware of the Ts and Cs, including any exclusions (conditions under which you are not covered), and what is required of you to maintain your cover.

But if you cheat in order to lower your premium, such as telling your insurer you are the regular driver of a vehicle when it is, in fact, your 20-yearold-son, you are really only cheating on yourself, like people who cheat in academic examinations: it is likely to backfire.

On the other hand, if you believe you have been treated unfairly by your insurance company, there are avenues of recourse, including the Ombudsman for Short-Term Insurance, whose service is free.

Martin Hesse

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MAIN TYPES OF PERSONAL LINES INSURANCE You can get insurance for many things, but if you own a home, and have possessions in the home plus a car, these are the five main types of cover you need. Insurers often bundle three of these – home contents, all risks and personal liability – into a single package. By Martin Hesse

1. MOTOR VEHICLE COVER

2. HOME CONTENTS COVER

A comprehensive policy covers you for most things that can happen to your car. A cheaper form of cover, “third-party, fire and theft”, will cover damage to the other vehicle/s in an accident, but will not cover damage to your own vehicle.

The insured value is not for a new car, but is your car’s second-hand market value, which depreciates each year. If you bought the car new and it is a write-off, you may be paid out less than what you still owe on it.

This covers all the moveable items in your home, but will not cover anything you take outside the home. You need to have an accurate estimate of the replacement value of everything in your home, so that you can be fully insured, and you should revise this figure once a year.

Some insurers will allow you to exclude certain items you don’t feel are worth insuring. Conditions will normally include having a certain level of home security in place.

3. ALL RISKS COVER This is insurance for valuable items you take with you outside the home, such as a bicycle, your laptop, camera and jewellery.

It usually comes in a package with your home contents policy.

Anything valued over a certain amount (say, R2 000) may be required to be listed separately and you will be charged extra on your premium. For these items, you’ll need proof of their value, such as a valuation certificate for jewellery or a store receipt.

4. BUILDING COVER This is cover that homeowners need to have on their property. If you are in a sectional-title scheme, this cover will be the responsibility of the scheme, and any premiums will be included in your levy.

But if you own a freehold property, you need to take out this insurance yourself – in fact, banks won’t grant you a bond unless such cover is arranged. The insured value needs to cover all costs if the building is totally destroyed – for example, in a fire.

5. PERSONAL LIABILITY COVER This is a less obvious form of insurance that is also usually bundled together with your home contents cover. It covers you for damages claimed by a third party if you are sued (but not in the case of a car accident, where any liability is covered by the Road Accident Fund).

For example, if you negligently leave your pool gate open and a toddler sustains brain damage after nearly drowning in your pool, your liability in the event of a court case will be covered.

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LIVING TOGETHER? HOW TO INSURE YOUR BELONGINGS If you’re in a serious romantic relationship, you can insure your things jointly under one policy, but if you are just friends or housemates, you need to be separately insured.

THE economic downturn over the past year, coupled with the need to reduce expenses, has seen a rise in vacant properties across South Africa and an increase in people living together, or cohabiting.

Taking the decision to move in with a housemate or your partner is a big step. It’s wise to consider the emotional, financial and insurance implications and have critical conversations upfront.

Personal lines underwriting

managers at Santam, Marius Steyn and Marius Neethling, say that there are a few considerations people need to think about when merging households. “In the scenario where you move in with your partner, an insurer usually considers you the equivalent of a common-law husband and wife, depending on the seriousness of your relationship.

That means you can take out a policy together.

“If you are moving in with

a housemate, you and your housemate will need your own separate insurance policies. In this case, you will have to insure your own belongings, and communal-living underwriting rules will apply.”

Steyn and Neethling offer advice on what to consider before co-habiting.

HOUSEHOLD CONTENTS COVER

Moving in together often results in a staggering amount of

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SOME CONSIDERATIONS

● Remember, the main policyholder will be paid out in the event of a claim. It’ll then be up to him or her to pay the additional insured. Insurers don’t get involved in these politics and are not responsible if the policyholder does not pay his or her partner or housemate. So, trust is important. ● If you both have separate household contents policies with different insurers and are wondering which insurer to go with, don’t just pick the lowest premium price: consider the benefits and excesses – what you pay and what you receive in return. ● Get your household contents evaluated (or use an online calculator) so you’re certain you’re adequately covered for the replacement value of all your combined items. (Remember that replacement value is what it would cost to replace an item with a similar new item, not a second-hand one.) ● If you and your partner or housemate move home, you should notify your insurer of the

new address prior to the day you move. ● It’s in your interest to tell your insurer about all the security features in your home. Generally, there will be specific security requirements in order to qualify for burglary and theft cover. ● It’s not commonly known, but, if you happen to argue and temporarily move out and take some of your household contents with you, these items will still be covered in your temporary abode, providing this is a private building – not a tent or caravan, for example. This only applies to a temporary situation though – if it’s a permanent split, then you’ll need your own new policy.

● Vehicle insurance is also important. Remember to add your partner as a regular driver on your policy if he or she uses your vehicle more frequently than you do. ● If the relationship comes to an end, you should get your own policy as soon as possible, especially if you have one policy between you, but you’re not the main policyholder.

Remember, if you’re the additional insured, it’s up to the policyholder to pay you in the event of a claim, which could get difficult if you’re not together anymore.

Supplied by Santam

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“stuff”. Which means you and your partner or housemate will probably need to update the household contents insured amount. If your relationship is seen as serious (insurers look for things like how long you’ve been together and if you’ve bought furniture together), an insurer will treat you the same as they would a married couple. This means you can take out a policy between you, with one person being the main policyholder and the other the “additional insured”.

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WHY WE ARE PAYING FOR UNINSURED DRIVERS “Keeping insurance affordable becomes difficult to do when a large number of drivers do not carry their fair share of costs.”

IF YOU own a car and have insurance, then the problems caused by uninsured drivers – in the form of accidents they can’t pay for – are being passed on to you. According to a recent study, with South African roads being among the most dangerous globally, the likelihood of an accident occurring that you will have to pay for as an insured driver, is extremely high.

Christelle Colman, spokesperson for Old Mutual Insure, says accidents with uninsured drivers add to the financial burden of responsible road users who do pay for car insurance.

“Of the 12 million-odd cars on our roads, only about one third are insured. This means that you have an almost 70% chance that, if you are in an accident, it will be with an uninsured driver,” says Colman. “The high percentage of motorists without any form of motor insurance means that the minority who do insure their vehicles are being forced to subsidise the others through higher premiums.”

She says this issue should irk every insured driver, because paying from your pocket for someone else’s bad behaviour, especially if you comply with the

rules of the road, does not work in your favour. Not only does it affect you financially, but it also adversely affects your claim record.

“Keeping insurance affordable becomes difficult to do when a large number of drivers do not carry their fair share of costs,” says Colman. “We need to increase the number of insured drivers on our roads because ultimately, this will translate into a reduction in the cost of motor insurance.”

She says that with a bigger pool of insurance contributions, the insurance industry can pass on lower premiums and lower excesses to consumers. This is because of the principle that the contributions of the many compensate for the losses of the few.

“We need car insurance to be mandatory for every car owner before the driver signs on the dotted line to purchase their car. This is standard practice the world over. Our view is that if you can’t afford insurance, you shouldn’t be driving a car, because this means that you cannot adequately protect your or someone else's asset in the event of an accident,” says Colman. She is among those calling for legislation on

compulsory third-party vehicle insurance to be reintroduced in South Africa, an idea mooted by Finance Minister Tito Mboweni in his 2020 Budget Speech.

Compulsory third-party insurance was enforced in South Africa from 1942 until 1997.

The insurance covered bodily injury and damage to motor vehicles. It was replaced with the Road Accident Fund (RAF), which has provided financial aid for death and bodily injuries sustained in motor vehicle accidents. However, the cost of the damage to the vehicles is usually left to the consumer and the insurer.

Colman says it may be some time before compulsory third-party vehicle insurance is reinstated, and in the meantime you need to understand the ins and outs of your policy.

If you are in an accident caused by someone else, your insurer will usually try to recover the costs on your behalf from the other party. Colman suggests you take these extra steps to increase your chances of recouping the costs: ● Always contact the police and obtain a case number.

Your insurer will need the case number as evidence that an accident occurred.

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“Until compulsory third-party insurance is introduced again,

● It is vital to get as much information at the accident scene as possible, including photographs of the scene and the vehicles involved. This can significantly assist insurers in assessing the damage. You will need to find out if the other party is insured and, if so, the insurer and policy number.

You also need to obtain the other party’s ID, name, surname and contact details, which are all necessary in lodging your claim and case. ● Make sure you know what the excess (the upfront amount you must pay from your own pocket) is on your policy. It may be worthwhile to pay a higher monthly premium in return for a lower excess or none at all. You will have to ask your insurer if they offer this. Many policyholders only find out about hefty excesses due by them when they suffer a loss, when they may be ill-prepared to afford it, so it is useful to know what your insurer pays and what you are expected to pay.

“Until such time that compulsory third-party insurance is introduced again, all motorists are encouraged to take out a vehicle insurance policy, even if it is only third-party cover. This is a cost-effective option that will, at the very least, ensure that you are covered if there is financial recovery against you for causing an accident,” Colman says.

Supplied by Old Mutual

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all motorists are encouraged to take out a vehicle insurance policy.”

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YOU MAY PREFER INSURING INDIVIDUAL ITEMS INSTEAD OF YOUR HOME CONTENTS Advances in technology have enabled insurers to move beyond the traditional one-size-fits-all blanket approach IN THE past, young people in rented dwellings owning just a few things would probably not have considered taking out home contents insurance. It would only have appeared on their radar when they bought their first home and started to fill it with shiny new appliances and furniture. That’s changing fast, with younger people now starting to think about contents insurance sooner than they previously would have.

There are two reasons for this, says Ernest North, co-founder at AI-driven car, home and contents insurance provider, Naked. The first is the fact that many young

people own expensive items they cannot live without: for example, a mountain bike they use for leisure and exercise, a smartphone, or a MacBook they may use to earn a freelance income.

The second is the arrival of affordable and easy-to-buy insurance products designed for standalone items. “It used to be impossible or extremely costly to insure most personal items on a standalone basis.

Now anyone can get a quote and buy cover for a single item online within seconds. This has made insurance accessible to a wider market,” says North.

It would still be wise to get

quotes for full home cover and for standalone insurance for your possessions to see what suits your needs best.

YOU NEED TO BEAR THE FOLLOWING IN MIND ● The cost of insuring multiple items in a home contents policy will generally be lower than buying separate standalone cover for each item. It makes sense to get full home cover if you’re looking to insure more than one or two items, and then to add your portable possessions to the policy. ● A home contents policy can cover the cost of items that are often overlooked, such

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as clothing, small appliances, and kitchen utensils – one only appreciates how expensive these are if it becomes necessary to replace them all at once after a robbery or fire. ● Home contents policies usually include personal liability cover.

Personal liability is when you are held legally responsible for causing harm to someone else or damage to their property.

Personal liability cover protects you financially and legally if a lawsuit or claim is brought against you. ● Home insurance cover includes benefits such as emergency home assistance – for example, it may cover the cost of a

plumber if your geyser bursts or an emergency security guard while your gates are being fixed after a break-in. ● You will pay only one excess per claim, even if many of your things are stolen or broken in one incident. If your bike and smartphone are insured on standalone policies and both are stolen, you’ll pay an excess for each.

ADVANTAGES OF STANDALONE INSURANCE ● It’s quick and easy to get a binding quote online. You can buy it within minutes if you’re happy with the quote. ● Getting standalone insurance

is more transparent and often cheaper than buying it along with a product purchase from the retailer – for example, cellphone insurance along with your new mobile contract. ● You can adjust the excess per item to suit your needs – the higher the excess, the lower the premium and vice versa. On items where you think the risk is very low, you may want to choose a high excess. ● Digital insurance providers with low overheads may offer cheaper cover than traditional insurers who need to cover the costs of their infrastructure.

Supplied by Naked

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Rands & Sense

PARK ANY DOUBTS: INSURANCE TIPS FOR SECOND – HAND CARS

Bertus Visser

In recent months, second-hand car purchases have accelerated as the economic impact of Covid-19 and lockdowns have been felt and travel needs have changed. For some, second-hand cars are an attractive option, but they come with insurance considerations too.

BEFORE YOU BUY There are various options when it comes to purchasing second-hand cars, including being able to check if a car has been in an accident. Make sure you buy from a reputable dealer, and be extra cautious when buying a vehicle online. Unfortunately, fraud is a reality. When buying from a dealer, you may be able to request an e-Natis document to determine if the car was stolen.

Second-hand cars may not cost as much as new cars, but keep in mind that they may require more frequent repairs or have different safety measures in place. Also, a second-hand car may have had features added after the vehicle was bought. Make sure these extras, such as a sound system, are included in your insurance.

DO THE SUMS While new cars often include a maintenance plan, maintenance won’t necessarily factor into your purchase price when you buy a second-hand car. You need to consider the cost of services, new parts and licenses.

A second-hand car is not necessarily less of a crime target than a new car, and you are at equal risk of getting into car accidents. Upgrading security could be a prudent move, but it’s also worth checking what would be needed, or would impact your insurance premium.

The retail value of your vehicle is also worth discussing with your adviser or broker, as you could qualify for a reduced premium based on your car being an older model. Your adviser will be able to advise on products worth considering for vehicle maintenance too.

All vehicles need to be maintained so that they run well and don’t malfunction, so obtaining a service history on a second-hand car is helpful, if possible.

Remember to service your car regularly (even if you don’t drive often – every 15 000 kms or once a year is a good guideline to follow), and to check that tyres are rotated and replaced as needed. It is up to you to ensure your vehicle license is kept up to date.

KEEP YOUR POLICY UPDATED Your second-hand car will need to be properly added to your insurance policy. Be sure the correct information is carried over to your cover. Many of us have moved homes recently or are working from home and may have forgotten to update this information.

Bertus Visser is the Chief Executive of Distribution at PSG Insure

FACT FILE

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THE OMBUDSMAN FOR SHORT-TERM INSURANCE

THE Ombudsman for Short-Term Insurance is Judge Ron McLaren.

According to its website (www.osti. co.za), the office of the ombudsman is wholly independent and does not answer to insurers, consumer bodies or the regulator (the Financial Sector Conduct Authority). Its mission is to resolve short-term insurance complaints fairly, efficiently and impartially.

The ombudsman resolves disputes between consumers and short-term insurers: ● As transparently as possible, taking into account our obligations of confidentiality and privacy; ● With minimum formality and technicality; and ● In a cooperative, efficient and fair manner.

COMPLAINTS In the latest annual report, for 2019, of the complaints received: ● 49% were for motor vehicle claims; ● 20.1% were for homeowners (building cover) claims; ● 7.9% were for commercial insurance claims; and ● 6% were for home contents claims.

Of the 8 578 complaints finalised in 2019, 1 573 (18.3%) were resolved with some benefit to the consumer.

REASONS FOR CLAIM DISPUTES Christelle Colman, insurance expert at Old Mutual, says the report shows that the consistent drivers of insurance failure remain as follows: 1. Under-insurance Failing to insure household contents at their current and correct replacement value.

2. Poor maintenance lnsurance policies only cover damage caused by unforeseen events; home maintenance is the responsibility of the homeowner.

3. Alarms not working Homeowners should ensure that alarms work at all times. It is the policyholder’s responsibility to keep the home security system operational.

4. Driving violation A motorist driving under the influence of alcohol or narcotics or without a valid driver’s licence is committing a criminal offence.

Criminal acts automatically invalidate insurance cover. This may also include reckless or negligent driving and speeding.

5. Unroadworthy vehicles Cracked windscreens, worn wiper blades or tyre treads below the legal limit of 1.6mm are common reasons for accidents and claims repudiation.

6. Safe overnight parking Insurers have different requirements on what constitutes secure overnight parking. Off-street parking is

acceptable to some, while others may insist that the vehicle be kept behind a locked door or gate.

7. Unnamed drivers If a motor insurance policy provides cover for named drivers only, claims will be rejected if another, unnamed, driver was behind the wheel at the time of the accident. Another common practice is parents listing themselves as the regular drivers of their children’s vehicles in order to secure a lower premium.

WHAT TO DO IF YOU HAVE A COMPLAINT? Before contacting the ombudsman’s office, complain to your insurance company first. It is best to complain in writing.

Make sure that you keep copies of all correspondence between you and your insurer. If you are not happy with your insurer’s response, you can complete the complaint form and send it back to us either by post, fax or email. You can also lodge a complaint online.

For the Ombudsman’s contact details, see page 20.

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MONEY BASICS

with MARTIN HESSE

INSURANCE TERMS YOU NEED TO KNOW A MAJOR reason people shy away from financial issues is the wide use of terms that only financial experts and lawyers understand.

In insurance, the more you know about how it works, the concepts behind it and the terms used, the less likely you are to lose out, either through paying too much, or by having a claim rejected.

Here are explanations of

some common legal terms and concepts in insurance.

ACT OF GOD Any incident that is not manmade, which causes destruction to property or injury or death to people or animals. Examples are storms, earthquakes, lightning and tsunamis.

AVERAGE

You are required to insure your

assets at their full value. Under the “average” clause, if the replacement value of the items is more than you have insured them for, your claim will be reduced in proportion to how much you are under-insured. For example, if the contents of your home is insured for R200 000 but valued at R400 000, it is insured for half its value.

Therefore, each time you claim for loss or damage, the insurer will pay out only half of the value of the claim.

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BETTERMENT The purpose of insuring property is to financially restore you to the position you were in before the loss or damage to the property.

You should not be better off financially than you were before the loss. In other words, the insurer may not compensate you for more than the value of the insured property.

CONSEQUENTIAL LOSS Consequential loss is normally excluded from cover. This is a loss you may experience as an indirect consequence of an initial, or first, loss, for which you are covered. For example, if you have a motor accident and consequently miss an important meeting that causes you financial loss, it would be regarded as a consequential loss.

or when you claim, when it is necessary or a requirement to do so.

REPLACEMENT VALUE This refers to the cost of replacing an insured item with a new item.

Home contents, building cover and all-risks personal lines policies are based on replacing the lost or damaged item with a similar, new item.

However, vehicle insurance works differently: your car is typically insured for its second-hand market value.

REPUDIATION This refers to the insurer refusing to pay a claim for a particular reason.

The insurer may repudiate a claim if: ● The policy did not cover the event which led to the loss or damage; EXCESS ● You acted contrary to what The excess is an agreed amount of money you pay from your own was stipulated in the contract; ● The item being claimed for was pocket to the insurer towards repairing or replacing an insured not insured under the contract; or ● The contract had been item. A rule of thumb is the lower the excess, the higher your terminated before the event that led to the claim. premiums, and vice versa.

EXCLUSION An exclusion in a policy document is something that the policy does not cover.

All exclusions should be stated clearly in the document, and should be explained to you by your broker, so that you know what you are and are not insured for. For example, a policy might not cover damage to a car caused by hail.

NON-DISCLOSURE Non-disclosure is when you fail to disclose information, either when you take out a policy

SALVAGE Salvage refers to the insurer becoming the owner of your damaged property if it has compensated you to the maximum amount for that property. This applies to movable goods such as motor vehicles and computers.

SUBROGATION This is the right of an insurer to recover from the person who has wrongfully caused the loss or damage to your property the costs it has incurred to compensate you. If you are in

a motor accident that was not your fault, the insurer will try to recover the costs of the damage from the third party and refund your excess.

SUM INSURED For each property insured there is a limit (a maximum amount) to what the insurer will pay or settle in the event of a claim. This is referred to as the “sum insured”.

This should be the amount it will cost you to replace your property should it be completely destroyed or lost.

THIRD PARTY This is the person or entity that, apart from you and the insurer (the first and second parties), is involved in a dispute or claim. In a car accident involving you and another vehicle, the third party would be the driver or owner of the other vehicle.

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MICROINSURANCE READY TO DISRUPT AFRICA’S INSURANCE INDUSTRY MARIUS BOTHA shares his enthusiasm about how technology is making insurance accessible to previously underserviced markets on the continent WHEN it comes to insurance, there are few more exciting markets to be right now than Africa. Before Covid-19 struck, McKinsey predicted the African insurance market would grow at around 7% per year between 2020 and 2025. That’s nearly twice as fast as North America and three times faster than Europe.

The pandemic slowed that growth to some extent. But we’re still seeing significant innovation in the African insurance sector, where fintech insurers are using technology to reach previously underserviced markets across the continent, making microinsurance products available through mobile phone networks.

With the exception of South Africa, traditional retail insurance remains largely undeveloped on the continent.

But Africa is a prime market for microinsurance, which is small, rapidly underwritten financial protection against a specific risk over a relatively short period

of time – like hospital cover for accidents, for example.

Its growing popularity is giving millions of Africans access to life and hospital insurance for the first time. And while microinsurance started out largely being targeted at under-insured people, it’s only a matter of time before it moves up the value chain to disrupt the traditional insurance sector.

One of the biggest challenges facing the traditional insurance industry is to develop products that are suitable and accessible to people with lower incomes and younger generations with different needs. That’s why we’re increasingly going to see fintechs creating completely new kinds of insurance that will meet the dynamic needs of so-called millennial and GenZ audiences, disrupting the traditional model and increasing the user base of people insured in the process.

Right now, we’re seeing several trends combining to create a perfect storm of growth for the African insurance sector.

1. A SURGE IN MOBILE COVERAGE The key to the growth of the microinsurance market on the continent has been the rapid expansion of mobile network providers, which provide the ideal delivery mechanism for the spread of the product.

Insurance in the palm of your hand? It doesn’t get faster, more convenient, or easy to use than that.

2. A GROWING DIGITAL ECONOMY At the same time, we’ve seen Africa’s digital economy grow exponentially over the last year, largely driven by Covid-19.

The pandemic has dramatically changed consumer behaviour, and consequently, how insurers interact with clients.

More than ever, consumers don’t want to sign paper forms, or stand in queues. They want to access their financial products quickly and easily from their mobile devices – and here, microinsurers have proven

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agile enough to deliver the right products through this channel.

At the same time, technology is making it possible for higher levels of product customisation than ever, with the ability to meet a growing range of niche needs.

3. A VAST UNDER-INSURED POPULATION Perhaps the most transformative aspect of microinsurance is that it protects those who need it the most. People with lower incomes

need insurance even more than the middle class, because they are more vulnerable and have a smaller cushion of resources to draw upon in times of need.

Having insurance shields users from the type of economic shocks that would otherwise have kept them locked into an endless cycle of poverty.

Mix together a boom in mobile coverage, a thriving digital economy and an underserved population, and the ingredients

are in place for an insurance revolution. By providing insurance to millions of Africans for the first time, innovative fintechs and microinsurers are truly driving financial inclusion across Africa and making a tangibly positive difference to people’s lives.

Marius Botha is the group CEO of aYo Holdings, a joint venture between MTN and Momentum Metropolitan.

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Money Quiz Test yourself on your financial knowledge

1. What type of insurance covers your valuables outside the home? a) Personal liability cover b) Home contents cover c) Building cover d) All risks cover 2. What proportion of a general equity fund portfolio must be in equities? a) 60% b) 75% c) 80% d) 100% 3. What type of fund can invest in any asset class in any proportion? a) Multi-asset flexible fund b) Global equity fund c) Money market fund d) Interest-bearing variableterm fund 4. What is the name of the US investment firm that pioneered low-cost index funds? a) Berkshire Hathaway b) Vanguard Capital c) Bridgewater Associates d) BlackRock 5. Which of these companies is not in the S&P 500 index? a) Capitec b) Amazon c) Tesla d) Apple

ANSWERS: 1d, 2c, 3a, 4b, 5a, 6c, 7b, 8d, 9b, 10c.

6. What are the JSE’s daily trading hours? a) 8am to 4pm b) 8.30am to 4.30pm c) 9am to 5pm d) 9.30am to 5.30pm 7. Who is the short-term insurance ombudsman? a) Muvhango Lukhaimane b) Judge Ron McLaren c) Judge Bernard Ngoepe d) Adv Nonku Tshombe 8. Which government body is responsible for the market conduct of insurance companies? a) The SA Reserve Bank b) The Department of Trade and Industry c) The SA Revenue Service d) The Financial Sector Conduct Authority 9. Below what annual income threshold will South Africans under the age of 65 pay no income tax in the 2021/22 tax year? a) R56 700 b) R87 300 c) R92 500 d) R104 200 10. At what age can you claim the higher exemption on interest income of R34 500 a year? a) 55 b) 60 c) 65 d) 75

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Planning Perspectives

How to save on short-term insurance

Palesa Tlholoe

THE Covid-19 pandemic has tipped the country on its head – entire industries have changed, along with job descriptions and salaries. As a result, many people have been forced to take stock of their monthly budgets and see which expenses can be cut.

One of the big-ticket expenses is short-term insurance – for your car and household items. Is it necessary to keep paying the same amount, particularly car insurance, even though the risk is lower because your car has been locked up in the garage while you work from home? For some people whose incomes have diminished, or in the worst cases, disappeared, does it make sense to reduce or cancel car and household insurance to put food on the table, or to keep up with home loan repayments?

This is an important question and it needs to be considered carefully, because you might end spending more money if you cut back on your insurance. The risks haven’t gone away. Things are starting to get back to normal – new normal, at least! Traffic is picking up and there are more cars on the roads than there were during lockdown.

Burglaries are back on the rise and smash-and-grab incidents are sadly a norm once again.

If you’ve chosen to cancel your car or household insurance, or opted for a higher excess to lower your premiums, you need to consider some of the real risks that you’re exposed to. Getting into an accident without proper insurance can be tremendously expensive – you’ll either have to find cash somewhere to pay the high excess, or you’ll have to fix your car out of your own pocket. Don’t forget that you’re also liable for damage to the other vehicle if you cause the accident, and what if you’re still paying off your car? You’ll have to settle that amount, too.

Scary statistic: It’s estimated that two-thirds of the cars on our roads are not insured because people simply can’t afford it. Should you get into an accident with an uninsured vehicle – even if it’s not your fault – it will be futile trying

to claim from the other party and you’ll have to foot the bill for the repairs yourself. Also remember that if you changed your car insurance from “business use” to “private use” during lockdown, but now your car is back on the road for business purposes, your claim might be repudiated or not paid in full. Okay, so what’s the solution?

Instead of ditching your insurance or making the excess prohibitively high, here are some practical steps to reduce the cost of your short-term insurance: ● Assess your needs. Cars depreciate in value over time – you have the option to either insure at book value (replacing like-forlike) or at full retail value. Choose one that works for your budget.

Similarly, items like jewellery that you insured under your household contents might not be as valuable as they were when you first purchased them. A broker can help you assess the true value of your assets to help reduce your premiums. ● Downgrade. The more expensive the car, the more expensive the insurance. Consider downgrading your vehicle to something more modest instead of keeping that BMW X3 and paying sky-high premiums. ● Shop around. Insurance is a competitive industry and every company is desperate for your business. Don’t just settle for the premium that you’ve been paying – shop around for a better deal. ● Remove the bells and whistles.

Some car insurance cover includes dent- and scratch-repair, tyres, rims etc. If affordability is your concern, you can live without these.

In summary, don’t ditch your insurance completely! Rather consult with a Certified Financial Planner (CFP) or a qualified insurance broker and do a thorough analysis of your short-term insurance needs.

With professional help, you’ll soon find a solution that suits your budget, without putting you at unnecessary risk.

Palesa Tlholoe, CFP, is co-founder and a wealth manager at Imvelo Wealth

INFORMATION

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Here are sources that can help you with financial education, give you more information on savings and investments, and afford you recourse if you have a consumer complaint or a complaint against a financial services provider

FINANCIAL EDUCATION Financial Sector Conduct Authority MyMoney Learning Series https://www.fscamymoney.co.za South African Savings Institute #WaysToSave https://waystosave.co.za/ BANKING Ombudsman for Banking Services ShareCall: 0860 800 900 or phone: 011 712 1800 Email: info@obssa.co.za www.obssa.co.za CONSUMER ISSUES National Consumer Commission Toll-free: 0860 003 600 or phone: 012 428 7000 Email: complaints@thencc.org.za www.thencc.gov.za Consumer Goods and Services Ombud ShareCall: 0860 000 272 Email: info@cgso.org.za www.cgso.org.za

FINANCIAL ADVICE Ombud for Financial Services Providers phone: 012 470 9080 or 012 762 5000 Email: info@faisombud.co.za www.faisombud.co.za INVESTMENTS Financial Sector Conduct Authority ShareCall 0800 110 443 or 0800 202 087 info@fsca.co.za www.fsca.co.za LIFE INSURANCE Ombudsman for Long-term Insurance ShareCall 0860 103 236 or phone: 021 657 5000 Email: info@ombud.co.za www.ombud.co.za MEDICAL SCHEMES Council for Medical Schemes MaxiCall: 0861 123 267 Email: complaints@medicalschemes.com or information@medicalschemes.com www.medicalschemes.com

Credit Ombud MaxiCall: 0861 662 837 or phone: 011 781 6431 Email: ombud@creditombud.org.za www.creditombud.org.za

RETIREMENT FUNDS Pension Funds Adjudicator ShareCall: 0860 662 837 or phone: 012 346 1738 Email: enquiries@pfa.org.za www.pfa.org.za

National Credit Regulator ShareCall: 0860 627 627 or phone: 011 554 2600 Email: complaints@ncr.org.za or (debt counselling) dccomplaints@ncr.org.za www.ncr.org.za

SHORT-TERM INSURANCE Ombudsman for Short-term Insurance ShareCall 0860 726 890 or phone: 011 726 8900 Email: info@osti.co.za www.osti.co.za

TAX Tax Ombud ShareCall: 0800 662 837 or phone: 012 431 9105 Email: complaints@taxombud.gov.za www.taxombud.gov.za PROFESSIONAL ORGANISATIONS Fiduciary Institute of Southern Africa (FISA) phone: 082 449 2569 Email: secretariat@fisa.net.za www.fisa.net.za Financial Planning Institute of South Africa (FPI) Phone: 011 470 6000 Email: info@fpi.co.za www.fpi.co.za South African Institute of Tax Professionals (SAIT) Phone: 012 941 0400 Email: info@thesait.org.za www.thesait.org.za FINANCIAL DATA ◆For ◆ the latest financial market indicators, go to https://www.iol.co.za/businessreport/market-indicators ◆For ◆ the latest quarterly unit trust performance, go to https://www.iol.co.za/ personal-finance/collective-investments ◆To ◆ look up performance of a particular unit trust fund go to https://www.iol.co.za/ personal-finance/fund-look-up