Insurance Downsizing During Tough Times

Should you downsize your insurance in these tough times? Expert opinion is a bit divided.

With many South Africans more than tempted to cancel their insurance policies because of the tough financial bind they currently find themselves in, experts suggest that downsizing the policy to cover the bare essentials may be a better idea than cancelling altogether.

While this may be sound advice in the grand scheme of things, the President of the Financial Intermediaries Association of South African (FIA) has an alternative suggestion.

He suggests that policyholders ask themselves honestly whether they will be able to afford to pay for even half a new car if theirs is stolen and they have no insurance to cover the theft.

"Indiscriminately reducing your insurance when the economy is tight is probably the worst decision one can make," said Arnold van der Linde.

"If you cannot currently afford your monthly insurance premiums, you should ask yourself if you will ever be in a financial position to replace your car in the event that it is written off or stolen," he added. "Besides hurting you financially, such an erroneous decision can hurt you."

Van der Linde said that before customers cancel or downsize their insurance policies in order to cut back on monthly costs, they should check to see whether other steps may help first.

One of the most important things that customers can do is ensure that all high value items are safely stashed away until finances have improved.

Another is to increase the excess amount voluntarily so that specific personal risks are carried by the insured.

However, the most important thing that customers can do to ensure that they are getting the best value for their hard earned money, are not double paying on certain items and are paying for policies that are tailor made for their specific needs, is to consult with their insurance agent on a regular basis.