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What I wish I knew about insurance when I was younger

If you are starting your career, you may be thinking about getting insurance to protect your possessions. In the spirit of Youth Month, to help you avoid insurance pitfalls that can cost you dearly as a young professional.

Receiving your very first pay cheque as a young working professional can be a liberating yet daunting experience. Imagine the pride of buying your first car, a pair of name brand sneakers, a designer watch or the newest smart phone with the money you have earned. Adequate and comprehensive insurance policies are key to protect these possessions.

Anything valuable and considered an asset, can be insured.

The feeling of buying the thing that you worked so hard for is priceless, but there is a very real risk of loss in today’s world, so it is important to remember that as you step up and step out of the home, that you look after that which you have worked hard to get.

Below are five lessons to be learnt about insurance, before starting your career – both good and bad.

1. Understanding the terms & conditions of your policy

Insurance is there to protect you when things go bad; so, it is very important to firstly, make sure you get insurance, also ensure you understand your policy schedule and the policy wording when you buy a policy.

If you don’t, or if you don’t take the steps to make sure you are properly protected, you must accept that if you experience a loss, such as with a car accident or your smartphone is stolen, you will still be liable to pay monthly instalments, but won’t necessarily have the item anymore.

If you have insurance, understanding the terms & condition of your policy is important. You must be aware of what you are NOT covered for and having the cheapest cover is not necessarily always the correct approach. Value for money and peace of mind when you need it most is critical. The cheapest cover available may come with consequences.

“For example, the insurance with the lowest monthly premium may mean a very high excess at claim stage. Or worse, if you experience a loss, only then do you find out that you are underinsured. If you want to save money in the short-term, understand that it may cost you at claims stage if you have an inferior product.”

2. Do your homework and due diligence

This is why it is important to take the time to make sure you understand your insurance policy. A vital question to ask, is whether the sum insured will adequately cover you to replace or repair your belongings in an event of a claim and put you back in a similar position prior to the loss.

It is a good habit to annually check with your insurer that your assets are correctly insured.

“To avoid being underinsured when claiming, do an annual assessment as you scale up your possessions. As we upgrade to smart living in this digital world, take a picture of the receipt and send it to your insurance company or broker, or upload it on your insurance app, so that they can add it to your policy. Use the digital inventory calculators to update the cost of your insurable assets, it is essential that you keep updating the list of assets that you have with your insurance provider.

You will also need to check with your insurer that they adjust your premium on those items which as items depreciate. For example, motor vehicle premiums.

“Many insurers now do this automatically without you needing to check in with them, so it is worthwhile to confirm this as part of your due diligence.”
To add to this, it is important to know that the more you claim, the more expensive your premium may become.

3. Consider top up or add-on products to protect you

If you recall your very first car purchased – Probably a Toyota Tazz or equivalent back in the day, – which was an easy choice because it was in high demand and would be relatively cheap to maintain.

If it was financed, you were not allowed to drive it out the dealership without having good comprehensive vehicle insurance. The dealership salesman would recommend that you take top up cover or credit shortfall cover, to protect you if there was ever an insurance claim. If you accepted without giving it much thought; little did you know at the time, that this would be one of the best decisions you would ever make. If you car was ever stolen you would discover there was a hefty shortfall to pay, but the top up insurance cover could potentially save you from a further financial loss.

Below are some lessons learnt from our experience when purchasing your first vehicle insurance:

• Ensure your vehicle is insured on retail value basis – which is the value you would expect to buy the vehicle from dealer floors.
• Ensure all optional extras added to your vehicle are noted
• When checking your affordability for a new vehicle, remember to factor in insurance cost. Most first-time vehicle buyers forget to factor in fuel and insurance cost on their budget when the plan to buy a new vehicle

4. Insurance protects you when life happens

When starting your career and  building or buying a home, “content and structure insurance is necessary to cover you for things such as burst geysers, mechanical breakdown of appliances like a fridge or a washing machine, giving you peace of mind.”

5. As you step up and step out of your home, protect your personal belongings

As a caution, insuring assets and the concept of insurance, is not a “get rich quick scheme”; the purpose of insurance is to put you back in the same position as you were prior to a loss, relieving you of financial burdens.

It is critically important that as young professionals progress in their career, to protect the goods that you acquire and step out of the home wearing and on your person.
Name brand sneakers, spectacles, a fancy watch, an expensive smartphone… in many cases is not far-fetched to assume that you step out of the house wearing items which are indeed valuable. Ask yourself what will happen should either of these items get damaged, lost or stolen?

Handbag insurance has been pivotal to protecting against loss. (unspecified all risks)
If your insurer has handbag insurance, opt for this as it means you are covered without needing to specify items like perfumes, make up, expensive pens, etcetera. Should you lose or misplace your personal belongings, you should be covered.
Another option is All Risk cover, however there is a limit to how much your insurer will cover when it comes to your all risk cover, which covers those items which you use away from your home or on your person, like laptops and mobile phones.

As you progress in your career, your personal brand will also evolve and your taste for more expensive things in life will grow; it is important that you match your insurance cover accordingly.

For assistance with your short term insurance CLICK HERE


Pictures by Pixabay
Article courtesy of Antonia Oakes, Retail Executive of customer experience & responsible business at Old Mutual Insure
Featured in FANews