Can't Pay Your Insurance Premiums for 1 Month

January is a notoriously bad month financially for most South Africans. After the extra expenses of the Christmas holiday season parents are hit with back to school expenses as well. The slowdown in the economy world-wide and now here at home too; spiralling costs, high interest rates, and the impact of crime has left its mark on us. To balance the books you may decide to skip your insurance payments for the month, just to give you a breather.

What are the consequences?

Short-term insurance premiums are payable in advance – in most cases the insurance company will debit you on the first of the month for the premium due for that month. On the 1st of January you were still enjoying the sun and the beach; and recovering from the festivities – insurance premiums were the last thing on your mind.

On the 2nd of January you suddenly remember your insurance deductions; when you check your bank account you realize that there were not sufficient funds in your account to cover the deductions any way. So you decide to send a post-dated cheque in the mail and forget about it. On the 20th of January you drive back home after your well deserved holiday and you are involved in a car accident. Luckily only minor injuries but your car is badly damaged.

When you phone to report the claim to your insurance company you are told that you have no cover for the month of January as no payments were received. How is that possible? – You have ALWAYS paid on time and the ONE month you pay late…You threaten to go to the Ombudsman.

What does your contract say?

Insurance is a contract between you and the insurance company. In any contract there are conditions that need to be fulfilled. In short-term insurance – be it car or house holders insurance one of the conditions will be that you must make monthly premium payments in advance. If you read your policy schedule you will find that most insurance companies will allow you a grace period of 15 days and then they will debit your account again. Now you have to pay a late payment fee as well. If the payment is returned by the bank again you will have no insurance cover for the month.

Some companies will debit you as usual the next month and you are very lucky if you did not have any loss during the month for which you had no insurance cover. In other cases the insurance company may have cancelled your policy after the non-receipt of one month’s payments. Legally they are obliged to inform you in writing of such as action. Can a company just cancel your insurance if you miss a payment? Yes, you are in breach of the contract you had with them and that gives them the right to cancel your insurance cover.

Can you afford to be without insurance cover?

You may feel that you simply cannot afford insurance any more but can you afford to live with the stress everyday knowing that you have no cover? The question should rather be: Can you afford not to have any insurance cover? Financial responsibility is now more vital than ever. Paying your insurance should be a priority in your monthly budget.

Just think of the consequences if you skip your insurance for one month and all your household belongings are destroyed in a fire. Or your car is written off and you still have an outstanding car loan on it as well?

What can I do to improve the situation?

If you have never worked out a monthly budget now is the time to start. Having insurance cover is part of any sensible budget and risk management plan. You can find help and examples on the internet to assist you in drawing up a monthly budget. Start living within your means, we were spoilt by the easy access to credit. It is not going to be easy, as a matter of fact; you may have to make some pretty painful decisions. Just do it.

Instead of cancelling or even just skipping insurance payments look at ways in which you can lower your insurance premiums. On this site you will find a number of articles giving you advice on reducing your premiums, you do have a number of options available to you. Take care.