There is much debate over whether to use a broker or go direct, but for all the pros and cons on both sides, this is a decision that only you can make. A broker may be able to highlight better options that you would otherwise not be aware of, but if you would rather avoid “middleman” costs and are confident enough to make an informed decision on your own, then go direct.
Denis Beckitt, writing for the South African Insurance Association (SAIA), advises that brokers and direct insurance have to be licensed under the Financial Advisory and Intermediary Services (FAIS) Act.
“They must also, without being asked, provide you with full information on what your policy covers and what it excludes, the contact details of the insurance company, the amount of your premium and whether it increases annually, what you must do to make a claim, and inform you that you are allowed to pay premiums up to 15 days late,” he adds.
One of the most important things to remember about short-term insurance, particularly if you want to keep your premiums to a minimum, is that the value of items changes over time but that your insurance premium is worked out relative to the value of the item when you insured it. As your asset
depreciates in value, so your premium should come down commensurately, but it’s up to you to regularly alert your insurer to reduce the sum insured.
This applies to technology products that depreciate rapidly, but is particularly relevant to motor vehicles too. Most insurance policies cover vehicles at market value which is halfway between retail value (what a dealer could sell the car for) and trade value (what a dealer could buy the car for). If you want maximum payout in the case of a vehicle write-off, you need to shop around for “retail value” contracts. “Expect of course to pay around 5% more on your premium,” says Beckitt.
Under- and over-insuring
By the same token, you don’t want to under-insure your asset. Insuring it for less than it is worth can leave you seriously out of pocket when you claim. Here’s how. You insure the contents of your office for R100 000 initially. But as the years go by you purchase more items so that the true value of the office contents is R500 000. Four laptops are stolen and you put in a claim for R50 000, all the while believing that you are covered because you have a policy for R100 000. However, because the office contents are valued at R500 000 and you only have R100 000 worth of cover, every R1 worth of goods is only insured for a 20c loss. So you’ll only get R10 000 for your R50 000 claim. Insuring something for more than it is worth, doesn’t pay either. You can’t insure your company vehicle for R120 000 if its market value is R100 000 and expect to get a R20 000 windfall when you claim.
The insurer will only pay claims up to a maximum of the market value of R100 000. The message is clear: keep it real.