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Short Term Insurance

Basically, there are two types of insurance that you should be concerned with - long-term insurance and short-term insurance.

Long-term insurance involves life-insurance. Short-term insurance involves the insurance of day-to-day things, such as the contents of your home, your personal belongings, your car, your boat, your airplane etc.

For example, if your car is stolen tomorrow and it was worth R400 000, if you were not insured would you be able to come up with a spare R400 000 to replace it? If the answer is no, then you, like most people, need short-term insurance.

Taking out short-insurance means that the insurance company carries the risk for your possessions up to the amount they are insured for. In return, you pay the insurance company a monthly premium or payment that is carefully calculated according to the amount you wish to be insured for.

The key to short-term insurance is not to be under or over-insured but to be insured according to the current day value of your possessions. If under-insured, you may find that your insurance claim does not cover the loss or damage of your possessions or property.

If over-insured, it means your premiums are too high and you are in effect paying your insurance company more than you need to.

This brings us to what is called excess. All short-term insurance companies require you to pay in an additional pre-determined amount of money when you make a claim, known as an excess.

For example, if your total claim is R10 000 and your excess is R1000, this means you have to pay in a R1000 while your insurance company pays out the remaining R9000.

There are two kind of excess - compulsory excess and voluntary excess. Usually by choosing voluntary excess, the cost of your monthly premiums will be lower than for compulsory excess.

When seeking short-term insurance be aware that there are many factors that can affect your monthly premiums. For instance, the age and condition of your car and whether your car has a sufficient anti-theft devices such as alarms, gear locks and vehicle-tracking devices will affect your monthly short-term premiums.