As most household incomes shrink, Savings Month, this year coinciding with South Africa’s fifth month of COVID-19 lockdown, is placing monthly expenses, especially insurance bills, firmly in the spotlight. And it is not a kind light.
It is critical that South Africans under stress use any extra time they may have in lockdown to sensibly review their insurance covers,” says Christelle Colman, Insurance Expert at Old Mutual Insure. Instead of abandoning all cover and exposing themselves to risk, COVID-19 lockdown actually presents South African households with, “opportunities to reduce cover as many of the standard risks that people are ordinarily obliged to cover are now either non-existent or much reduced,” advises Colman.
Get a broker
Before diving in and slashing cover willingly, “get professional advice,” says Colman.
All insurers have dedicated advisors, experts in helping clients identify their specific risks. Policy holders should use this advice, either by talking to their insurers or contacting an independent broker. Brokers work across the industry, generally have incredible experience, and do a great job helping people understand – and correctly cover – their specific risks. “Don’t be fooled into the belief that direct is always cheaper,” adds Colman.
Restructure for changed times
COVID-19 lockdown aside, policy holders should get into the habit of regularly reviewing and restructuring their cover.
Individual circumstances change all the time. One of the biggest drivers of claims rejection, even in normal times, is policy and cover mismatch. That is, “the detail of what the policy is designed to cover no longer matches policy holders’ circumstances as their circumstances have changed and they have not updated their policies,” explains Colman.
The changed circumstance in which people are living and working in COVID-19 lockdown presents a number of opportunities to restructure cover.
Savings months provides a lens to, “highlight some of these restructuring – and ultimately savings – opportunities,” says Colman.
Firstly, two-car households now working from home can reduce cover on their second car not being used for grocery purchases or other short, necessary, trips. If the second car is parked securely on a premises and not being used, “either reducing the cover or increasing the excess will realise a substantial saving,” advises Colman. Be sure, however, to, “regularly start and run the motor of the car not being used,” she adds.
Secondly, households with a student or two studying from home who no longer need cars to travel to campus and back can realise substantial savings by reducing cover on student vehicles or third-party fire and theft. Alternately, they could increase excesses. Insuring young drivers is expensive. Households can achieve, “substantial savings by reducing cover on student vehicles,” says Colman. That said, parents should not fall into the trap of thinking they can save on premiums by insuring student vehicles under their own name. This is fraud. Also, in the event of an accident or loss, it is very quickly established who the permanent driver is. “Insures will not pay out in cases of misrepresentation,” warns Colman.
Thirdly, households all working from home in lockdown – or not working at all – should consider reducing their all risks covers. People no longer having to travel to work with their laptops, or no longer socialising or going out wearing expensive jewellery, could, for example, take their smart phones or watches off their all risks polices for three months or so. “Since all risks covers are generally pricey, this would realise substantial savings,” says Colman. Since so many corporates are planning to allow their staff to work from home until at least the end of the year, “removing or reducing all risks items for five or six months will amount to a lot of money,” adds Colman.
Fourthly, shop around. South Africa is in an extremely tough economy. It’s definitely a consumer’s market. Right now, insurers are offering extremely competitive premium packages. Moreover, most, “will be prepared to negotiate better rates or offer discounts and savings options to win over good clients with a clean claims’ record,” advises Colman.
Finally, even though finances are stretched, policy holders can achieve savings of up to 10% if they pay premiums annually, in advance. This is an especially good idea in an environment where people could lose their jobs or suffer reduced income at the drop of a hat. Paying now, “if you have the money, will at least ensure you are covered for the next very difficult year while you find a new job or develop a new income stream,” advises Colman. Another advantage of paying in advance means that the terms are locked in for at least the next 12 months and can as a general rule note be changed, “even if the market – and other policy packages – tighten,” she adds.
While COVID-19 lockdown certainly presents a number of opportunities to save on premiums, working from home does, however, add at least one new risk.
Since clients can no longer be met in many offices or other public spaces, “people, increasingly, have clients come to their homes for essential, unavoidable face-to-face business meetings, critical maintenance or business deliveries,” says Colman. Under these circumstances, “it is worth considering commercial insurance cover for your home office,” says Colman. Should anyone be injured or suffer loss while going about their work at your
home, “you could be held liable and should look to ensure that you are protected – at least for the period that you will be operating from home during lockdown,” advises Colman.
The big insurance take-away for Savings Month, however, is not to throw the baby out with the bathwater.
Insurance is an expense. Yet given the far bigger expenses that it can prevent, making an informed – and professionally guided – review of your current polices in the changed circumstances presented by COVID-19 lockdown, “will realise substantial savings, at least for the next three months – while ensuring that you remain covered for the very real risks that you face,” concludes Colman.