Dear Networkers - This marks the start of our financial articles!

Barbara Whitfield is an experienced Chartered Accountant and has written some advice regarding Short Term Insurance! I hope you gain something from her years of insight into this topic!

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This morning I was caught in traffic because the police had sealed off some of the streets because a car had hit a My-City bus earlier. There was serious damage to both vehicles and the bus had collided into an office block. According to radio reports the bus driver had to be cut out of the bus. Horrible, but it could happen to any of us!

Once you’ve been in an accident you will never forget it. It is burned into your memory for life. Part of that experience is dealing with your insurance company. In the above scenario, the bus company will claim on their insurance but the insurance company will, in turn, claim against the driver of the car as it appears to have been his fault. What if he is not insured? He could lose his house, his business…..!

The aim of short term insurance is to achieve the recovery of accidental losses. This is done by means of risk management.

A premium is paid to an insurer who then carries the risk. In the event of an accident the insurer is obliged to pay out to the insured. However, because of the risk management each policy has certain conditions and exclusions or exceptions.

Generally, higher risk means a higher premium. By agreeing to certain exclusions the premium can be lowered. Exclusions or exceptions to the policy can bring the premium (i.e. the cost) down but then the exceptions are effectively self-insured by you, the policy holder.

The lowest premium is not necessarily the best cover. As with all things, you pay for what you get. The value of the premium must be determined by the insurance cover. Be particularly careful when comparing one insurance company’s cover to another to ensure you are comparing apples with apples.

Most insurance companies have websites through which you can access their products.

We’ve all heard horror stories about insurance. But often these problems are self-inflicted. Insurers ask questions when a new policy is taken out and it is so important to ensure that you answer these correctly and factually. It is at this stage that the insurer determines what risk there is in your specific case and thus the premium.

Then you have to ensure that your side of the bargain is fulfilled. If, for example, your policy requires a burglar alarm it is your responsibility to activate it when leaving the insured premises otherwise your policy will not pay out in the event of a claim.

“So what do I do now?” I hear you cry.

The S A Insurance Association has user friendly guides which go through some of the advantages and pitfalls of being insured. Log on to www.saia.co.za and go to “Consumer Information” where you can download their excellent consumer education booklets. They’re well written and cover most of the bases and have examples of the most common mistakes policy holders make.

Be an educated consumer and remember always to read the small print. Good luck!

Barbara Whitfield
Chartered Accountant (South Africa)