Here at WageWise, our aim is to help you better understand your finances and the options you have when it comes to managing your money. This month, we explore the topic of insurance and why you need it.
Insurance is an important way for you to protect your life for when things go wrong. We all face risks and emergencies in our lives – whether it’s linked to our health, our jobs, or our personal belongings like our home or car. Having insurance is a reliable way to manage these risks because it gives you peace of mind financially.
There are two types of insurance you can get, which are grouped based on time.
- Short-term insurance
This insurance is usually taken for a specific or ‘short’ period of time and may be temporary based on your needs. This insurance usually covers possessions. For example, you may take out vehicle insurance in case you have a car accident, or household insurance in case something in your home gets damaged or stolen.
- Long-term insurance
This insurance covers life-changing events to help provide you with an income in the longer term. This insurance usually covers people. For example, you may take out a funeral policy to cover the costs of the funeral if there is a death in the family, or a life policy to help provide for the policy holder’ remaining family members when he/she dies.
Both of these types of insurance are necessary, but during hard times like now with COVID-19, long-term insurance is even more important.
We know that there are a lot of South Africans experiencing financial difficulty during this pandemic and you may feel like the answer is to cut back on some of your insurance payments. It’s not.
The way insurance works is that you enter into a contract with an insurance company where you make regular payments (called ‘premiums’) to the insurer. If you make a claim, your insurer pays out for the loss that is covered under your policy. BUT this can be declined if the policy is not paid up – so even if you miss just one payment, you can risk not being compensated or paid out when you really need to be.
What if you can’t pay right now?
If you are having difficulty paying your insurance premiums, it’s important to know that you have options.
Contact your insurance provider or financial adviser who can help you – they may be able to restructure or lower your cover and reduce your monthly premium, don’t make any rushed decision or allow your premium debit orders to bounce without talking to your insurance provider.