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Insurance

Cars, both yours and someone else’s, can be dented and written off in crashes or stolen. People get injured or get sick and require medical care. To replace what you have lost will cost money. Insurance is money you need when an event occurs that you may not have at the time of the event.

That’s where insurance comes in. Insurance is a way of safeguarding for the worst-case scenarios. By paying an insurance company or other financial institution smaller monthly instalments, if or when you get some bad luck, you will be covered (either fully or partially) by your insurance.

Depending on your insurance cover – if you get sick, your car gets dented by a taxi, or your house gets broken into – you should be OK.

By not taking out insurance, you are taking a gamble that everything will be OK. You could very well be right. Sometimes everything is OK. But life is not always OK and things go wrong. Being without insurance can cost you a lot more money. By taking out insurance, you are transferring the risk of loss to an insurer and paying a premium to have that risk insured

TransUnion: "For years, the South African insurance industry has been laser-focused on customer-centricity, often adopting new technologies and distribution channels before the rest of the world. Like the banking industry, insurance providers are at the forefront of digital transformation and data analysis.


So why is it that around 70% of cars in SA are uninsured? Why do fewer than 20% of South Africans have a medical aid?"


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​Short-term & Long-term Insurance
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Short-term Insurance

Short-term insurance, also known as general insurance, provides financial protection against unforeseen events or losses that may occur within a short period, typically 12 months depending on the type. Others will auto renew and undergo fee and cover changes that you need to be sure you have taken note of.

Types of Short-Term Insurance:

-  Motor Insurance: Covers damage or loss to vehicles.

If your car is insured and it gets stolen, your insurer will pay you out for the value you have insured, which will cover your debt to the bank and you can get another car. If it gets stolen and you are not insured, you will not only still be in debt to the bank, but also without a car. That is the last thing anyone wants.


Types of Short-Term Insurance:

-  Household Insurance: Covers damage or loss to homes and contents.

If lightning strikes your house, robbers clean you out of all your appliances, and a truck drives through your fence (sorry for your bad luck by the way), household insurance is what covers your loss in each instance.

-  All Risks Insurance: Covers valuable items against theft, loss, or damage.

-  Homeowner’s Insurance: Covers the actual loss of the house structure.

If someone drops a cigarette that starts a veld fire and your house is one of 20 burnt in the blaze, having homeowner’s insurance (compulsory if you have a bond from the bank) will mean you can start again. Without it, you better hope you have deep pockets

-  Health Insurance: Covers medical expenses (not to be confused with medical aid: Health insurance usually covers specific, defined medical events or expenses, such as hospitalization or cancer treatment. Medical aid offers broader coverage, including routine medical care, preventive services, and sometimes additional benefits like dental or optical care.

-  Event Insurance: Covers events, such as weddings or conferences.


Types of Short-Term Insurance:

-  Travel Insurance: Covers unexpected events while traveling.

A classic example of short-term insurance is if you travel overseas for a trip and you worry about your valuables or your health. Travel insurance covers loss of baggage, theft, medical expenses, and even loss due to delay.

-  Business Insurance: Covers business assets, liability, and interruption.

If an enraged employee of the company next door to yours burns down the building and your office is destroyed in the process, business insurance should cover most of the damage and you should be able to get new premises and equipment. If not, your business could take a huge knock and may never recover.

-  Liability Insurance: Covers legal liability for damages or injuries.

Personal liability is the sort of thing you will probably never need, but if you do, you’ll be very thankful you have it. It is cover against someone suing you, in your personal capacity, for f inancial loss, physical injury, or death.



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Long-term Insurance
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Long-Term Insurance

While short-term insurance focuses more on things and assets, long-term insurance is focused on the thing you own for the longest period… your life. So, long-term insurance covers people. Long-term insurance, also known as life insurance, provides financial protection for individuals and their loved ones against long-term risks, typically spanning multiple years or a lifetime.

Types of Long-Term Insurance

-    Disability Insurance: Covers loss of income due to disability.

Also known as income protection this type of long-term insurance covers you if you become disabled. If your disability prevents you from working, the insurer covers the income you would have earned had you been able to.

-    Critical Illness Insurance: Covers severe illnesses (e.g., cancer, heart attack).

-    Income Protection Insurance: Replaces income if unable to work.


Types of Long Term Insurance


Life Insurance: Pays out upon death or terminal illness.

Life insurance is a contract between you and the insurer where the insurer promises to pay a designated beneficiary (usually your family) a sum of money when you die. While you are alive, you pay the insurer a premium either in regular installments or as a lump sum for the policy. Depending on the details of the policy, terminal illnesses may also result in a payment. As with most contracts involving large sums of money, there is fine print written into the limitations. For example, if you travel into a war zone for some reason, and you get killed, the insurer may not pay out. Clients with dangerous hobbies (eg. Paragliding, Skyding, Scubadiving) will pay higher premiums as they are higher risk). When you take out an insurance policy you need to tell your insurer if you participate in any extreme sports or dangerous activities. If you are unsure of whether or not your activity is regarded as a hazardous pursuit, ask your insurer.

You also need to tell your insurer if you take up a hazardous pursuit after you have taken out insurance.


Types of Long-Term Insurance

-  Funeral Insurance: Covers funeral expenses.

Insurance aimed at protecting you from the (usually unexpected and expensive) requirements of having to bury loved ones. The beneficiaries of such a policy will typically receive a lump-sum amount determined up front.

-  Retirement Annuities: Provides income in retirement.

-  Investment-Linked Insurance: Combines insurance with investments.

-  Endowment Policy: Lasting five to 15 years, endowments are more like short-term investment products that can be used as a savings instrument. They are for things you need to save up for e.g. a deposit on a house or your child’s education. A lump sum is paid out after a specific term (on “maturity”) or on death.

- Medical aid: Offers broader coverage, including routine medical care, preventive services, and sometimes additional benefits like dental or optical care. (Penalties payable if you leave and join a medical aid again. Rather downgrade or move to another provider, but never cancel)

What You Need Long-Term Insurance for:

-  Income replacement upon death or disability.

-  Financial security for dependents.

-  Funeral expenses.

-  Retirement planning.

-  Critical illness or disability support.

-  Estate planning.

-  Business protection (e.g., key person insurance).

-  Debt repayment (e.g., mortgage, loans).


Tips

1. Assess your long-term insurance needs.

2. Choose a reputable insurer.

3. Understand policy terms and conditions.

4. Review and update policies regularly.

5. Consider inflation and increasing costs.


The following pages have additional info:


-  Funeral Cover vs Life Cover

-  Retirement planning

-  Crisis Management Planning

-  Estate planning


Let M.A.L.I help you calculate how much Life Cover you would need.



Consequences of Dishonesty when applying for Insurance

Providing false or misleading information when applying for short-term insurance can have severe consequences. Insurers rely on accurate information to assess risk and determine premiums.

Types of Dishonesty:

-    Non-disclosure: Failing to disclose relevant information.

-    Misrepresentation: Providing false or misleading information.

-    Concealment: Hiding relevant information.

  

Consequences of Dishonesty:

1. Policy Cancellation: Insurer may cancel the policy, leaving you without cover.

2. Claim Rejection: Insurer may reject claims related to the misrepresented information.

3. Premium Refund: Insurer may refund premiums, but cancel the policy.

4. Additional Premiums: Insurer may increase premiums to reflect the actual risk.

5. Loss of No-Claims Bonus: You may forfeit your no-claims bonus.

6. Blacklisting: Insurer may share information with other insurers, affecting future applications.

7. Financial Loss: You may be liable for losses or damages incurred.

8. Legal Action: Insurer may take legal action against you for fraud or misrepresentation.

  

Examples of Dishonesty:

-    Failing to disclose previous claims or accidents.

-    Misstating vehicle usage or annual mileage.

-    Concealing pre-existing medical conditions.

-    Providing false information about business operations.

-    Understating property value or contents.


Getting the World to Fall in Love with Insurance

This isn’t exactly new. Back when fire insurance first started, insurance providers had their own fire brigades that would watch a building burn if they arrived and found it wasn’t insured. The industry has come a long way since then, but the perception that insurers are ‘out to get you’ remains.

How many people complain of exorbitant policy charges or wholeheartedly believe that insurance companies will find any excuse to reject a claim? 

Read the TransUnion article HERE

Two-pot system: Immediate benefits must be weighed up against long-term security

As of 1 September, South Africa embarked on a significant shift in retirement planning with the introduction of the two-pot retirement system. This new structure allows retirement fund members to access a portion of their savings without the drastic step of resigning from their jobs. On the surface, this change offers flexibility and immediate financial relief for many. But beneath the surface lies a complex web of tax implications and potential long-term consequences that deserve a closer examination.

Read the Mail & Guardian article HERE