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WITH the Fifa World Cup having arrived, many of us are splurging on new flat-screen TVs to catch the action. Unfortunately, some uninvited visitors sometimes borrow these gadgets permanently.
It's a shock, even if you are insured. And when you claim for it, you might have to fork out thousands of rands in excess. It's a real "eish!" moment, especially for young people just getting started. It helps to understand the concepts of excess payment and under-insurance.
Some insurance products offer their excess as a percentage of the value of the damage of the accident or loss. Or they list an excess of R1000 in bold letters but the print says "or 7percent of the damage, whichever is greater". Seems harmless enough . until you do the maths
Say you hit a minibus taxi, causing R150000 of damage to your car. An excess of 7percent of damage value means you will pay R10500 to get your car back from the panel beaters.
Most people can't afford that kind of excess. So choosing insurance with a higher, percentage-based excess to lower the monthly premium leaves you with less value for money. You simply pay for it when you claim. Choose a policy that has a fixed excess value and read the fine print.
Another point: Say you've insured your valuable household contents for R80000 and some valuables with a replacement value of R30000 are stolen. The insurance assessor does an inventory of your valuables and reckons the replacement value of your household contents before the theft was R100000 and not R80000.
This means the insurer will pay only 80percent of your claim - R24000 of the R30000 claimed. It's upsetting, because you worked hard to pay for that stuff and you paid premiums each month - another "eish!" moment.
The solution? Keep an updated list of your valuables and their value and insure for that amount.
If you insure a R1000 pair of soccer boots for the premium that applies to a R50 pair of second-hands, your insurer will pay only R50 when you claim. Rather be honest and insure for the right value.
If you're not convinced about the value of life assurance or short-term insurance, think about Old Mutual's On The Money programme, which shows how South Africa's Big Five animals' habits can help us develop good financial principles.
For instance, we can be inspired by the buffalo by protecting our herd with our combined strength. That's how insurance works: large numbers of people pool their money so that if one has a problem, he or she gets a payout.
For more information about the free financial education programme e-mail email@example.com.
lThe writer is head of financial education at Old Mutual South Africa