Wednesday, November 16, 2011

With the country’s unemployment rate hovering at a disconcerting 25.7% in the second quarter of 2011 and 62% of South Africans of the consensus that they struggle to make ends meet, it’s clear that millions of South Africans are under immense financial stress and are being forced to cut expenses dramatically to survive.

Telesure MD, Thomas Creamer, says insurance policy lapses – are a symptom of the cost cutting efforts of the country’s financially-strapped.

“With so many people experiencing financial difficulty on the back of the recession and against the backdrop of rising unemployment and the escalating cost of living, they are ruthlessly, and necessarily, cutting down on their expenses. Because food, petrol and shelter are essential expenses, its other areas, like insurance and medical aid that gets the cut.

“Compared to 2010, we are noticing an increase in people not having funds available to pay their premiums and some clients choosing to go uninsured. Cheaper offers are not always the best offer and clients should consider entering into negotiation with their current insurer, prior to taking up new insurance offers.

“Of course, insurers are empathetic to the strain under which many South Africans find themselves. Furthermore, we don’t want consumers to leave themselves wide open to the many risks against which insurance is there to protect them. So, we encourage people who find themselves struggling to make their monthly payments to speak to their insurance company rather than waiting until the policy has lapsed,” advises Creamer.

Creamer stresses that consumers who allow their car insurance to lapse put themselves at a considerable risk, particularly if the vehicle is financed.

“You will be held personally liable for any damage, loss or third party claims during the time you are not covered.

“Similarly, if your home contents aren’t insured and your home is burgled or struck by some other unexpected peril like a fire or flood, you will be liable for replacing your goods and possessions that were damaged. Few people can afford to absorb such a financial blow,” he says.

According to Creamer, insurance companies usually allow a grace period during which the policyholder can still pay the premium. If the person fails to pay within the “leeway” period, the policy will lapse. Should the person want to continue with the insurance contract after it has lapsed, a re-instatement fee in addition to the normal premium will usually apply.

Auto & General offers its clients free premium waiver cover for six months if the policyholder is unable to pay the premium due to retrenchment or dread disease. This means their insurance premiums will be covered for up to six months, without their policy lapsing, while they get back on their feet.

Creamer concludes: “We urge people to keep up with their insurance, particularly over the festive season when crime and road accidents usually increase. If you feel like your insurance is an unnecessary expense, weigh up the cost of your premium against what it could cost you should anything go wrong for you over the holidays. Look to cut back in other areas of your budget.”

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