Managing Risk & Insurance

One of the most common financial mistakes that people make is failing to plan for the risks that we all face in life. Although there are some risks we can’t plan for, there are many risks that we can expect.

For example if you drive a car you are likely to get a flat tyre at some point, as a driver you plan for this eventuality by having a spare tyre and a jack to change the flat tyre when it happens.

In our financial lives we can take similar precautions by planning for some of the risks we will all face to reduce the financial shock.

Broadly the risks we face can be divided into three categories:

  1. Short-term risk: this refers to things like a robbery, a car accident or a household emergency like a burst geyser
  2. Medium-term risks: this includes risk of retrenchment or loss of work due to disability
  3. Long-term risk: this includes the risk of an unexpected death or critical illness

Insurance

Insurance is a kind of protection for things that could go wrong and result in financial loss. Insurance products are designed to help you manage the cost if any of these unfortunate things happen.

insurance managing risk wagewise

Insurance

Insurance is a kind of protection for things that could go wrong and result in financial loss. Insurance products are designed to help you manage the cost if any of these unfortunate things happen.

The different kinds of insurance

There are lots of different kinds of insurance products offered by banks and other financial institutions and if you choose to take out insurance you will enter into a contract with an insurance provider to get cover against a potential loss.

Funeral policy
A funeral policy will help cover the costs of a funeral if you have a death in the family. You make monthly contributions and the money is only paid out on the death of a loved one. Funeral policies can’t be used as security for a loan. You will need to select the beneficiaries when taking out the insurance.
Life insurance
A life policy pays out for the remaining family members when a policyholder dies. You nominate the beneficiaries and then make monthly contributions. You need to complete medical tests and see a doctor before getting life insurance.
Credit life insurance cover
This is an insurance policy that pays off the debt of an item you bought on credit if you die or become disabled. This means your family won’t have to pay for the debt.
Accidental death insurance
This is a limited life insurance that covers you for death – but only due to an accident. This includes anything from car accidents to fatal injuries, but generally don’t cover any deaths resulting from health problems or suicide.
Hospital cash plan
This is a policy that starts paying you a daily cash amount for every day spent in hospital. These plans are designed to assist with the costs you incur should you be away from work or the home. You receive a payout and it is your responsibility to settle your medical bills. These are not medical aid plans and don’t cover the costs of GP visits, chronic medication, dentistry and optometry.
Short-term insurance
This is an insurance policy that pays out because of unexpected events like if your home is robbed or your car is damaged in an accident. You have to pay a monthly fee to get this type of insurance cover. You may have to pay in a small amount (called an excess) before you can claim. The insurance may not pay out the full cost of replacing or for fixing the item.

The importance of disclosure when taking insurance

Very often insurance claims are declined due to non-disclosure by policyholders. Some of the issues that lead to claims being declined are:

  • Incorrect beneficiaries identified
  • Non-disclosure of medical and lifestyle conditions 
  • Fraud
  • Driving under the influence of alcohol 
  • Suicide 
  • The policy is not paid up

The importance of disclosure when taking insurance

Very often insurance claims are declined due to non-disclosure by policyholders. Some of the issues that lead to claims being declined are:

  • Incorrect beneficiaries identified
  • Non-disclosure of medical and lifestyle conditions 
  • Fraud
  • Driving under the influence of alcohol 
  • Suicide 
  • The policy is not paid up

Beneficiaries

A really important step when taking out any kind of insurance is deciding on the people who will benefit when the insurance pays out. These people are called beneficiaries.

At different stages in your life you may choose different beneficiaries to benefit from your insurance policies. Typically when you have a family your dependents (normally your spouse, children and other family members) are the beneficiaries of any funeral, life or insurance policies you may have. If you want to change your beneficiaries you will need to supply their personal information (like ID numbers) to the insurance company.

It is your responsibility to ensure that your listed beneficiaries are up to date and that all their correct contact details are recorded with the insurance company.

If you don’t keep your beneficiary contact details updated it means that if there is a pay out to be made the provider won’t be able to contact your dependents and they may be left without financial support.

beneficiaries managing risk wagewise

Beneficiaries

A really important step when taking out any kind of insurance is deciding on the people who will benefit when the insurance pays out. These people are called beneficiaries.

At different stages in your life you may choose different beneficiaries to benefit from your insurance policies. Typically when you have a family your dependents (normally your spouse, children and other family members) are the beneficiaries of any funeral, life or insurance policies you may have. If you want to change your beneficiaries you will need to supply their personal information (like ID numbers) to the insurance company.

It is your responsibility to ensure that your listed beneficiaries are up to date and that all their correct contact details are recorded with the insurance company.

If you don’t keep your beneficiary contact details updated it means that if there is a pay out to be made the provider won’t be able to contact your dependents and they may be left without financial support.

Waiting periods and claiming

Normally when you take out insurance there is a waiting period. This is the time that must pass between you signing the contract and being able to make a claim.

To claim, you or the beneficiaries will need to supply certain documents like IDs and death certificates.

waiting periods managing risk wagewise

Waiting periods and claiming

Normally when you take out insurance there is a waiting period. This is the time that must pass between you signing the contract and being able to make a claim.

To claim, you or the beneficiaries will need to supply certain documents like IDs and death certificates.

#GetWageWise Tip: always consult with a certified financial planner when taking out insurance to make sure that you get the right product for you and your needs.

Frequently asked questions

Where can I buy short-term insurance?
You can buy insurance from the insurance company or from a financial adviser. Always buy insurance from a company registered with the Financial Sector Conduct Authority, or from a qualified and registered financial services adviser.
What is short-term insurance?
A short-term insurance policy is a way of reducing the cost of risks to your property (accidents, losses of property, robberies). You pay a monthly fee and if you lose something through an accident or another event, you may claim from your insurance company provided that the conditions of the claim are covered by the insurance policy.
What is excess?
When you claim from the insurance company, there is often an amount that has to be paid towards the replacement of the item you are claiming for. This amount is the excess. The amount (the excess) is shown in your policy document.
Can I read the policy before I sign?
Yes, you may take your insurance policy home with you and you must read it and understand the agreement before you sign. Make sure your questions are answered to your satisfaction before you sign any policy.
When can I cancel my insurance?
You may cancel your insurance at any time.
How long do I have to pay insurance?
For as long as you want insurance cover.
What is the difference between a “funeral policy“ and a “burial society“?
A funeral policy is often held by an individual, while a burial society is a collective savings scheme by friends and colleagues.
Saver Waya Waya WageWise is a financial literacy initiative of the ASISA Foundation. The WageWise website was largely funded by the Sanlam Foundation.