When signing up for short-term insurance
products, one of the first aspects to consider is whether or not you have to
pay an excess when submitting a valid claim. Excess is the first amount clients
have to pay when claiming from their policies in the event of an incident.
If you are using short-term insurance
products, it’s important to evaluate your lifestyle when deciding if you want
to pay an excess or not. High-risk profile clients are often prepared to pay
higher premiums with no excess due to the frequency of their claims while
low-risk clients are prepared to increase their excess as the likelihood of
them claiming is a lot lower and they will benefit from paying lower monthly
As insurance is comprised of the contributions of many to one pool of funds to
pay the claims of a few, excess helps deter multiple claims on small incidents.
In this way, people are encouraged to claim from their insurance policy to
cover financial loss in a significant event.
That said, insurance companies have found that some people get into the habit
of claiming for very small incidents. To prevent multiple small claims,
insurance companies advise to rather use insurance policies in the event of a
significant financial loss.
Additionally, clients pay an excess for two reasons: firstly, to eliminate
small value claims and the administrative cost involved when processing a
claim, and, second, to make the client co-responsible to ensure they manage
their insurance portfolio effectively.
In the case of vehicle insurance, the reality in South Africa is that 70% of
cars on the road are not insured. So, if you find yourself in an unfortunate
situation where someone without an insurance policy has driven into you, your
insurance company will not be able to recover the money or excess from the
other party as they don’t have insurance and also cannot afford paying for your
Drivers should also keep in mind that the excess on your policy is also linked
to your age and the length of time you’ve had your drivers’ license. An
additional excess may apply if a client has had their driver’s license for less
than two years. New drivers and drivers under the age of 25 should examine the
insurance quote to look at the excess structure because there could be more
than one excess.
Some insurance companies will also apply additional excess if a vehicle is
stolen. This could be calculated at a percentage of the value of the vehicle. Some
insurers, however, normally do not apply additional excess for theft and works
on a flat excess structure.
While paying a lower premium each month is great, paying a little extra to buy
down your excess or to have zero excess could help if you do find yourself in a
tight financial situation when needing to claim. Santam and other Insurers
offers a zero excess benefit for all clients 55 years or older, irrespective of
Doing insurance good and proper means giving clients peace of mind in the event
of an accident.
For assistance or more information regarding your motor vehicle excess visit www.esbrokers.co.za
Article featured in FAnews by Marius Neethling, personal lines
underwriting manager at Santam