Most of us have been in front of an insurance sales person, and most of us have bought some sort of insurance in our lives. The question is; do we really know exactly what we were buying?
Do we understand how the insurance we buy works?
Do we realise there are terms and conditions attached to the insurance that might may make it null and void in certain circumstances?
Does the insurance we buy really offer us the cover we intended it for?
It is important to understand the different types of insurance and what each type is used for:
Short Term Insurance – eg Car, Household
Public Indemnity Insurance
House Insurance – Content, Structural, Fire, Theft
“Mr Molefe popped into Game City to pick up some takeaways. As he was only going to be five minutes. He did not worry about locking his car. Unfortunately when he returned someone had rummaged through his car and taken his sunglasses and GPS. Mr Molefe has car insurance, so processed a claim for his losses. The insurance assessor ruled that as Mr Molefe had not taken due caution by locking his car, the insurance would not pay his claim as it was his negligence.”
This story tells us that there are situations where by the insurance company in legally allowed to ‘turn down’ a claim.
How do we know what
these circumstances are?
It is written in the “small print” of your contract. All insurances have a contract attached to the documents, which you are asked to initial on each page to prove you have read and understood. It is very important that you do just that, before signing it.
How do you know what
type of Insurance you need?
Insurance is used to protect yourself, your assets or your family. It is there to reduce the financial damage of future possible risks to you and your assets.
Life Insurance is to protect your family and your dependants. If you die, your life insurance will pay for your family to live. You pay whilst you are alive, and when you die (and only if you die) your family receive the insurance pay out.
There is a common mis-interpretation that Life Insurance is an investment. While a life insurance policy can have a cash-in value and an investment element, the primary purpose of pure life insurance is to pay out to your dependents, after you die.
Funeral Cover is quick-paying life insurance, designed to help the family cope with the cost of the funeral for their loved one. It should pay for the funeral, the casket, the plot of land for the burial and perhaps other costs, depending on what you have negotiated in the terms and conditions. There is no point having more than one funeral cover per person: simply put, you can only die once.
All companies must protect their staff by having Workmen’s Compensation insurance, so that if an employee is hurt while they are doing their job, they will receive some compensation. This insurance protects the employee and the employer.
Public Indemnity Insurance
Public Indemnity is used by public places such as hotels, so that if a guest is hurt whilst on their property, their medical bills and some compensation will be met by the insurer. It protects the guests and the hotel. Public Indemnity will not cover your car being broken into while parked at the hotel. The insurance for this would be your own private car insurance.
If you own a car and cannot afford to replace it, then you should have car insurance. If you are involved in a car crash, and the accident is your fault, you are responsible for the repairs to the other vehicle as well. Third Party Insurance is will only cover the other vehicle, not your own. That’s why it is cheaper. If you value your own vehicle highly, you must make sure that your car insurance is Comprehensive.
Some car insurances may cover only one driver, so if many people will be driving the car, you will again need to make sure that your insurance covers this. If you are going outside Botswana, you also need to check that your insurance covers this. Finally, remember, if you have a car crash whilst over the alcohol limit, your insurance may be null and void.
There are several types of house insurance – you need to find a good insurance broker to explain the many options to you.
Mr Modise has insurance on his house. What he doesn’t realise is that it is ‘contents insurance’, not ‘buildings insurance’. A pipe bursts under his foundations causing his house to crack severely through the lounge, almost splitting the room in half. Mr Modise (thinking that he has house insurance) places a claim for the repairs.
Unfortunately he is informed that although the insurance company will replace the damaged furniture in his lounge, they have no obligation to repair the structural damage.
Know your insurance
and what it covers
You’re now aware that there are many types of insurances available to you. You must take the time to understand exactly what it covers. Stop wasting money on unnecessary insurance such as more than one funeral policy, and make sure your assets and your loved ones are protected by the right insurances.
If you are not sure, sit down with an insurance broker and ask as many questions as you can think of. You are allowed to ask anything you want to know. It is the broker’s job to make you comfortable and confident with your insurance purchases.
*Author: Tshepiso Kgakatsi – Financial Wellness Trainer with S.C.I. Training (Pty) Ltd. © S.C.I. Training is a BQA accredited training institution specialising in Financial Education. We also offer Ethical Collection services for companies with debtors and Debt Counselling services for those in financial distress. For help and information contact 3180111 or 72309718 or [email protected]