Insurance Tips and Hints

Owning a home or a car in South Africa requires that you obtain the necessary and adequate (which is not always the same thing) insurance. Insurance is expensive in South Africa, especially car insurance, but you do not need to shell out a large part of your income for protection against all sorts of events. However, it is important to obtain insurance cover against those events that could seriously impair your finances if they do happen to you.

Your choice of the amount and type of cover to obtain will be determined by many factors, especially your choice of insurer. Remember there can be a whale of a difference between any two insurers — from how much they charge you to how they handle your claims. The prudent thing to do is to shop around and compare at least three companies. You want the best cover and the best price, though price should not be your only consideration. You want a financially stable company, to settle any claim you might file. And, there’s nothing like getting information about the companies from your friends and colleagues.

Some other useful things about arranging for insurance would include: 

Do compare cost of premiums from different companies but do not forget that, as in many other things, the cheapest is not necessarily the best.

Make sure you know the name of the insurer (or underwriter) of your policy. This name should be on your policy. The insurer should be registered with the Financial Services Board. You can verify the licence through the FSB website (www.fsb.co.za); click the ‘Departments’ tab and then ‘Insurance’.

Don’t confuse the role of an underwriting manager with a broker (though a person can be both simultaneously). An underwriting manager is authorised by the insurer to receive and accept policy proposals, issue the policy and handle claims.

If you use a broker, ensure he/she has direct communication with the insurer. Get a broker who is duly licensed by the Financial Services Board. Make sure the broker is a member of a professional association such as the Insurance Broker Council (www.ibcsa.org.za) or the South African Financial Services Intermediaries Association, which have strict codes of ethics for members to follow.

Insist on getting your copy of the entire policy document within 30 days after the insurance period starts. It is not enough to get only a policy schedule and/or a certificate or note of insurance cover.

Remember to obtain additional cover for any extras you put on your car. A standard car insurance policy covers you only for the standard motor, without extras, unless you notify the insurance company. The inclusion of extras in additional coverage should be explicitly stated on the insurance policy; otherwise, you might be considered over-insured.

The best time to arrange for car insurance is when you’re starting to consider buying a particular model. The kind of car you buy directly affects the cost of car insurance.

Insist upon your broker to confirm to you in writing that he/she will not switch to a different insurance company without your written permission. Under the Short Term Insurance Act, you have the right to know who your broker and insurer are at all times. Thus, your broker cannot transfer your policy to another insurer without written notification to you. For more information about your rights as a policyholder, visit the Short-Term Insurance Ombudsman website (www.osti.co.za).

Make sure to submit a complete claims history. Failure to fully disclose your claims history will make your policy immediately voidable. If you have a claim-free history, you’re entitled to a discount; protect this discount well.

A no-claim bonus is always affected when you file a claim, regardless of whether you are the innocent party or not. If you were innocent, your no-claim bonus will be reinstated, but only when your insurer has recovered the cost of your claim from the insurance company of the guilty party.