What I wish I knew about insurance when I was younger
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Receiving your very first pay cheque as a young working professional can be a liberating yet daunting experience. Imagine the pride of buying your first car, a pair of name brand sneakers, a designer watch or the newest smart phone with the money you have earned. Adequate and comprehensive insurance policies are key to protect these possessions.
This is the view of Antonia Oakes, retail executive, customer experience & responsible business at Old Mutual Insure, who says that anything valuable and considered an asset, can be insured.
“The feeling of buying the thing that you worked so hard for is priceless, but there is a very real risk of loss in today’s world, so it is important to remember that as you step up and step out of the home, that you look after that which you have worked hard to get,” explains Oakes.
Below she shares the top five lessons she learnt about insurance when she started her career – both good and bad.
1. Understanding the terms & conditions of your policy
Insurance is there to protect you when things go bad; so, it is very important to firstly, make sure you get insurance, also ensure you understand your policy schedule and the policy wording when you buy a policy.
“If you don’t, or if you don’t take the steps to make sure you are properly protected, you must accept that if you experience a loss, such as with a car accident or your smartphone is stolen, you will still be liable to pay monthly instalments, but won’t necessarily have the item anymore,” says Oakes.
She adds that if you have insurance, understanding the terms & condition of your policy is important. You must be aware of what you are NOT covered for and having the cheapest cover is not necessarily always the correct approach. Value for money and peace of mind when you need it most is critical. The cheapest cover available may come with consequences.
“For example, the insurance with the lowest monthly premium may mean a very high excess at claim stage. Or worse, if you experience a loss, only then do you find out that you are underinsured. If you want to save money in the short-term, understand that it may cost you at claims stage if you have an inferior product.”
2. Do your homework and due diligence
She says this is why it is important to take the time to make sure you understand your insurance policy. A vital question to ask, is whether the sum insured will adequately cover you to replace or repair your belongings in an event of a claim and put you back in a similar position prior to the loss.
Oakes says that it is a good habit to annually check with your insurer that your assets are correctly insured.
“To avoid being underinsured when claiming, do an annual assessment as you scale up your possessions. As we upgrade to smart living in this digital world, take a picture of the receipt and send it to your insurance company or broker, or upload it on your insurance app, so that they can add it to your policy. Use the digital inventory calculators to update the cost of your insurable assets,” says Oakes, adding that is essential that you keep updating the list of assets that you have with your insurance provider.
You will also need to check with your insurer that they adjust your premium on those items which as items depreciate. For example, motor vehicle premiums.
“Many insurers now do this automatically without you needing to check in with them, so it is worthwhile to confirm this as part of your due diligence.”
She also adds that is important to know that the more you claim, the more expensive your premium may become.
3. Consider top up or add-on products to protect you
Oakes recalls the very first car that she bought – a Toyota Tazz – which was an easy choice because it was in high demand and would be relatively cheap to maintain.
“Since it was financed, I was not allowed to drive it out the dealership without having good comprehensive vehicle insurance. The dealership salesman recommended that I take top up cover or credit shortfall cover, to protect me if there was ever an insurance claim. I accepted without giving it much thought; little did I know that this would be one of the best decisions I would ever make. My car was stolen and I discovered there was a hefty shortfall to pay, but the top up insurance cover saved me from a financial loss.”
Below are some lessons Oakes learnt from her experience with her first vehicle insurance:
- Ensure your vehicle is insured on retail value basis – which is the value you would expect to buy the vehicle from dealer floors.
- Ensure all optional extras added to your vehicle are noted
- When checking your affordability for a new vehicle, remember to factor in insurance cost. Most first-time vehicle buyers forget to factor in fuel and insurance cost on their budget when the plan to buy a new vehicle
4. Insurance protects you when life happens
Oakes says that when she started her career and started building a home, “content and structure insurance was necessary to cover me for things such as burst geysers, mechanical breakdown of appliances like a fridge or a washing machine, giving me peace of mind.”
5. As you step up and step out of your home, protect your personal belongings
She adds, as a caution, insuring assets and the concept of insurance, is not a “get rich quick scheme”; the purpose of insurance is to put you back in the same position as you were prior to a loss, relieving you of financial burdens.
She says it is critically important that as young professionals progress in their career, to protect the goods that you acquire and step out of the home wearing and on your person.
“Name brand sneakers, spectacles, a fancy watch, an expensive smartphone… in many cases is not far-fetched to assume that you step out of the house wearing items which are indeed valuable. Ask yourself what will happen should either of these items get damaged, lost or stolen?”
She says that handbag insurance has been pivotal to protecting her against loss.
If your insurer has handbag insurance, opt for this as it means you are covered without needing to specify items like perfumes, make up, expensive pens, etcetera. Should you lose or misplace your personal belongings, you should be covered.
“Another option is All Risk cover, however there is a limit to how much your insurer will cover when it comes to your all risk cover, which covers those items which you use away from your home or on your person, like laptops and mobile phones.
“As you progress in your career, your personal brand will also evolve and your taste for more expensive things in life will grow; it is important that you match your insurance cover accordingly,” concludes Oakes.