When Cheap Insurance Isn’t The Best Policy


When on the lookout for insurance, we are mostly likely to have one goal in mind: the cheapest. But, is cheap insurance always the best policy?

Let us explain. We would like to think we do the best research when on the lookout for an insurance package. The truth is, what the sales agent pitches may sway you with an insurance that is “the best price” but, quite possibly, not “the best fit” for your lifestyle needs.

In 7 Ways To Avoid Being Ripped Off By Your Car Insurer, CompareGuru mentions ways you can lower your insurance premium that you are in control of. These include remaining claim-free, having a squeaky clean driving history, and high security when your car is parked overnight, to just name a few.

The Risks Of Taking Out Cheap Insurance

The Johannesburg Flood was a testament to how not all of us realise how little we are covered for and fall into debt when crisis hits. Nine times out of ten, this is as a result of taking out an insurance policy that was “the cheapest”.

Michelle van Staden, Head of Claims at Mutual & Federal spoke about what some ‘cheap insurance’ policyholders in Johannesburg may be experiencing:

“While Insurers do cover floods as so-called ‘acts of God’, most policyholders do not distinguish between ‘property maintenance’ and ‘weather-related’ claims.”

The lesson here is to know exactly what you are covered for in all cases, but especially in an emergency. Should a predicament arise, i.e.: your car is stolen or a tree branch falls on your windscreen, you may find you are only covered for “the basics”, as a result of your cheap insurance premium.

The Benefits Of Combining Your Insurance Policies

Most insurers reward clients for combining their insurances into one package and offer significant discounts. Why? It costs more to lose clients than to process new ones. A combined policy also means more money for your insurer which means they are more willing to come down on a premium if it means keeping you as a client. Below are three benefits associated with combining your insurance policies: 

  1. Save thousands each month with rewards for a multi-policy.
  2. Remove frustration of having two different insurers with different deductibles and procedures.
  3. Save time by having one renewal date and one premium each month.

Here is a real time example provided by our insurance broker partner, Risk Benefits Solutions (RBS):

save, combining insurance, household contents, polo vivo

This information was based on a 29-year-old male. The car insurance premium dropped from R833.75 to R545.13 when paired with the household contents insurance.

So, What Should You Do When Taking Out Insurance?

The devil is in the detail:

  1. Take out insurance that covers the retail value or replacement cost of your asset.
  2. Make sure your insurance provides sufficient liability coverage and protects you against anything you may have caused in an accident.
  3. While the best insurance is most definitely Comprehensive Insurance, making sure you are covered for Third Party, Fire and Theft can prove invaluable. Especially when an unexpected accident renders you car-less and in no financial standing to replace the vehicle.

About Author

CompareGuru is the first truly independent online platform in South Africa that sources and provides a comprehensive comparative service of product options, with a focus on financial services including banking and insurance, as well as mobile and broadband. Through regular and in-depth market research, CompareGuru provides side-by-side comparisons that help consumers make informed decisions. At CompareGuru, we believe in the maxim that knowledge is power, and we strive to maximise the value for each consumer with clear, concise and up-to-date information. For more information visit http://compareguru.co.za/.