Short term insurance encompasses all types of insurance policies other than life insurance. Amongst others this includes vehicle, property, household, medical, personal liability, travel and business insurance. The reason why these policies are classified as short term insurance is because your insurance needs in this regard will change over time.
Unlike life insurance, short term insurance is taken out only for the period that you have need of it. This insurance option has provided many South Africans with the opportunity to cover the financial risks to their material possessions and those of their loved ones without paying hefty premiums.
Short term insurance is quite simply an agreement between a policy holder and an insurer. This agreement is binding for a limited amount of time or is flexible according to the individual’s circumstances. Basically, you are able to insure your car, your property, your household possessions or your person annually or on another short term basis.
The great thing about short term insurance is that it caters to your changing needs, allowing you cover for your assets without the long-term commitment to one house, one car or one standard of living.
How it Works
The amount of money that you will pay to your insurer at prearranged intervals is called a premium. This amount will be worked out according to your individual risk profile.
For example, if you’re looking to insure your car, an insurance provider will generally investigate your age, gender and driving record; the value of the car; where the car is parked and whether it has anti-theft devices in place. These factors will determine what premium you should pay. The greater your risk profile, the higher your premium will be.
An insurance policy outlines certain risks that will be covered by the insurer should they one day take place. For instance, if a thief breaks into your house and steals your electrical appliances, you will be able to file a claim for these stolen goods.
In most cases, you will be required to pay the excess on these items. This is essentially a small predetermined amount of money toward the replacement of these appliances. The balance will then be settled by your insurer.
It is important that you ensure your cover remains relevant as time passes. The balance of a claim will not be settled by the insurer if your valuables and assets are under-insured.
Finding an Insurance Provider
There are over 100 short term insurers available to South African consumers. When looking for an insurance provider, it is recommended that you get as many quotations as possible. In this regard it is best to make use of an insurance broker who will be able to present you with multiple options from a range of insurers.
The criteria for deciding which insurance provider to settle on should be based on a comparison between the different insurance providers. Compare the monthly or annual premiums you’ll be required to pay, evaluate which insurer offers a better excess fee on claims that you may lodge and find out if all your established risks are covered by the policy in question.
Insurance is an age-old system of risk management that has taken on new meaning in our consumer orientated society. Risks go hand in hand with the accumulation of assets, property and valuables. The most effective way of avoiding unforeseen financial crises is to hand these risks over to an insurer.
Overall, short term insurance is a valuable method of ensuring the security of your wealth and possessions without long-term commitment and large premiums.