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Consumers urged not to cancel insurance premiums after interest rate hike

The Reserve Bank’s decision in mid-July to hike interest rates by 0,25 basis points may have triggered a natural response to consumers cancelling their short-term insurances in hopes to see some relief from their monthly income.

Dawie Buys, Manager, Insurance Risks, the South African Insurance Association (SAIA) says that "although the interest rake hike does not have an immediate impact on the level of premiums and rates on short and medium term insurers, it is a huge concern for the industry, when consumers tend to cancel their motor and personal lines insurance due to a decrease in distributable income."

"It should be noted that an increase in premiums are not on the cards yet, however consumers should bear in mind that inflation and further increases in interest rates could also contribute to the increase of motor spares and other consumer goods which in the long run could have an accumulative effect on the value of claims which could ultimately lead to higher premiums.

The SAIA is doing everything it possibly can to educate consumers not to give up their insurance because if they do they can only suffer serious financial losses in the event of an accident or other damage to property.

The most important reasons to keep your short-term insurance coverage are linked to the assets you own."

For example:

Motor vehicles

Motor comprehensive insurance will cover you for own damage to your vehicle in the event of an accident, fire, storm (for instance hail), damage to other vehicles and property, should you cause the damage. Taking into account high accident rates, the frequency of inclement weather and high legal costs, (should you want to claim from someone else or defend a matter), it could ruin you financially if you are not insured. It should be borne in mind that if the vehicle is financed through a bank or other financial institution it is compulsory to have insurance which will also protect the asset of the financial institution.

Home Contents

The main risks covered in this instance are fire, storms, burglary and theft. Should you suffer a serious loss it could be financially devastating. Even if your geyser should burst, you could suffer serious damage to the contents which will also be covered. The high incidence of crime is just another reason why one should insure your home contents.

A private dwelling owned by you

Similarly you will have to bear the cost for losses to the dwelling due to a fire, storm and other contingencies, if you are not insured. It should be borne in mind that if the house is subject to mortgage, the bank or financial institution will insist on insurance and that their interests be noted as Mortgagee which will take precedence over your right to claim.

Legal Liability

All personal lines policies include Personal Liability cover for you and your family which will cover you where you may be held liable for injury/death or damage to property in terms of common law due to negligence. You could face claims running in many thousands, even millions if you are not insured.

Personal Lines Policies

All personal lines policies include many added benefits such as home assistance, medical rescue, roadside assistance etc., which makes taking out insurance even more attractive and could add to your peace of mind.

Short-term insurance policies could be designed to cater for your individual needs and sometimes one can limit this to the basics. However, when one compares the premium in relation to the exposure, which could run into many thousands even millions, (depending on the type of loss) in the event of loss, it makes good sense to take out and maintain your short term insurance policies. In the absence of cover you could be subjected to litigation, high legal costs or even be financially ruined.

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