Household Insurance Policy

Until recently, the South African economy was flying. Although slightly more indebted than the average consumer elsewhere in the world, we still had the luxury of spare cash in our pockets. The retail boom at the time bears evidence to the fact that South Africans were industrious at employing this cash, in addition to their readily available lines of credit, to add appliances, furniture, kitchenware, jewellery, leisure equipment and the like to their growing lists of earthly possessions.

Most of us will be surprised if we had to do a comparison of our pre-boom and post-boom household inventories, by just how much our home contents have increased in size.

Now, with our wallets becoming rapidly thinner, many consumers are sorely tempted to cancel their existing household insurance policies. Quite frankly, this would be pure folly. Replacing even just a half of our possessions, if anything untoward should happen, is likely to be well outside the financial means of most of us.

Instead of taking drastic measures that could leave you financially vulnerable, rather become insurance savvy. Not all insurers are equal, and not all their rates are the same. If you get smart about your household insurance, and if you shop around for a bit, you may be able to trim back on the premium you have to pay every month, without having to run the risk of being un- or under insured.

Sharpen your own pencils first

If you had to set out right now to find a cheaper household insurance premium, chances are that you will find some insurer somewhere along the line who is quite prepared to shave off a few meagre bucks in order to get your business. The amount you stand to save in this way is perhaps not really worth the rigmarole of moving your policy elsewhere.

Should making significant household insurance savings be your aim, view it as a give and take scenario: you have to give, before you can start taking.

Here is a four point plan to help you get your house in order:

1. Check your inventory. Take the previous inventory you submitted to your insurer, compare it to what you now have in your house and revisit the replacement values you initially documented. Be sure to take a realistic tack on the matter so as to avoid the traps of under- and over insurance. Also reconsider the specified items on your insurance policy to ensure that you still have everything you have specified and to re-evaluate the necessity of keeping some of these items on your specified list from a cost perspective.

2. Revisit your excesses. Check the excess sum you need to pay should you file a claim at your insurer. If you can afford to pay more in excesses, calculate exactly how much more. Increasing the excess amount affords you the opportunity to reduce your monthly household insurance premiums.

3. Revisit your claims history. If you have filed no or very few claims in the past, this should translate into an improved risk profile. Check whether you have been given any credit in the shape of reduced household insurance premiums by your insurer. If not, make a note of this too.

4. Crank up your security. Most people have some form of security in place to protect their properties, but does your set of security measures make the grade? To find out, speak to your current insurer. Ask them what you can improve from a security perspective that could reduce the risk and improve your household insurance premiums. If the difference between your current premium and your potential premium makes the expense worth your while, do it.

Then ask the household insurers to sharpen theirs

Once you have completed your four-point-plan, you can start shopping around. Using a broker (internet or individual), is usually the best and the least cumbersome approach. Ask them to contact your own as well as other insurers for quotations. The broker will need to provide the same details – and this includes the details of your four-point-plan – to all of them.

When you have all the quotations, do an item by item, term by term and exclusion by exclusion comparison. Although the insurer is responsible for making the information available to you, the onus is placed upon you as a client, to ensure that you read and understand the information provided. Here too your broker’s industry knowledge is likely to come in handy.

Finally, check the credentials of the insurers you approached. There are several ways that you can go about this. Perhaps one of the best ways to tackle this is by either calling the short term insurance ombudsman or by visiting their internet site at www.osti.co.za.

To conclude

When you complete your application forms be forthright in your responses. If you fail to disclose information or provide untruthful information pertinent to the insurer’s risk calculations, they may legally refuse to compensate you when you lodge a household insurance claim. Although succumbing to this temptation may save you some money on your household insurance policy right now, it is likely to cost you dearly in the end.