Planning Perspectives with Palesa Tlholoe

Palesa Tlholoe

How to save on short-term insurance

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

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

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

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