What can we say about insurance that hasn’t already been said a thousand times?
By now, you know it’s a worthwhile investment to protect your valuables and property in case of theft or damages caused by an accident or natural disaster.
You also know that having car insurance can mean the difference between financial ruin and financial support.
Without insurance, you’d be stuck paying for damages on your own, which can set you back quite a bit.
And while insurance is popularly referred to as a grudge purchase (because honestly, who enjoys parting with hundreds of their hard-earned rands?), there’s no mistaking its importance.
Can anyone say peace of mind?
But, like in most situations, there’s a right and wrong way of doing things.
If you land on the wrong side of the insurance coin, you may be confronted with several potential financial impacts of making a mistake with your insurance.
These mistakes include underestimating your coverage needs, not reviewing your policies regularly, failing to report claims promptly, and not understanding insurance terms and conditions.
Underestimating Coverage Needs
Once you decide to plunge into the deep waters of car insurance, you’ll still need to keep your wits about you, starting with knowing your coverage needs.
A major mistake one can make in insurance is underestimating coverage needs.
As we said, few people are excited about purchasing an insurance policy but begrudgingly do so because they know they need it.
This less-than-enthusiastic approach often makes people go for the bare minimum coverage to save money.
Inadequate coverage often results in you failing to recover the total amount of your losses, leaving you unable to replace the vehicle or recover from the loss.
Underestimating coverage can also lead to the risk of being underinsured.
If you are underinsured, you may find yourself in a position where you don’t have enough coverage to protect yourself from financial losses, leaving you vulnerable to significant financial hardship.
All of this results in higher out-of-pocket expenses, which can be burdensome, especially if you’re already struggling to make ends meet.
Here are some examples of specific types of insurance where underestimating coverage can be particularly costly:
Homeowner’s insurance:
In the event of a fire, theft, or other covered loss, you may not have enough coverage to replace your home, belongings or any other damaged or stolen property.
Auto insurance:
Inadequate coverage in auto insurance (also called car, vehicle or motor insurance) can result in insufficient protection for your vehicle and other drivers’ cars, which exposes you to liability lawsuits.
Medical insurance:
Lacking medical insurance can be especially problematic in the event of a severe illness or injury, resulting in astronomically high medical bills. Insufficient coverage can also mean having a limited range of medical services available.
Life insurance:
Underestimating life insurance coverage affects not only you, as the policyholder, but more so your family members. It can result in inadequate financial support, leaving them unable to maintain their standard of living.
To ensure that your coverage needs don’t fall through the cracks, start by assessing what those needs are.
Consider your assets, occupation, lifestyle and dependents and the potential risks that could affect them, e.g. financial harm, accidents, natural disasters or illnesses.
Next, you’ll want to research different coverage options, their benefits and limitations. This will be accompanied by determining the appropriate coverage level to suit your needs.
Ensure that your coverage limits are sufficient to cover potential losses. If not, you may need additional coverage beyond the standard policy.
Not Reviewing Policies Regularly
Another mistake people repeatedly need to correct is to review their policies regularly.
Your insurance needs can and will change over time, and the best way to keep up with these changes is to stay updated with your policy documents.
Insurance policies can be complex, so it’s crucial to understand the specifics of your coverage.
Failure to do so has numerous consequences, including but not limited to the following risks:
- Inadequate coverage to protect you in case of an unexpected event.
- Missing out on discounts and potential savings.
- Changes in insurance company premiums may leave you paying more than what you’d initially agreed to pay.
- Missing essential details or changes in your policy, resulting in unforeseen gaps in coverage.
Personal circumstances can have a significant impact on your insurance coverage needs.
The types of insurance where these changes are most important can vary depending on individual circumstances.
For example, getting married or having a child can impact your health insurance coverage needs. You may need to add your spouse or child to the policy or switch to a different plan that better meets your family’s needs.
Similarly, with life insurance, you may need to increase your coverage if you have dependents.
Changes in personal circumstances like moving to a new location, purchasing a new car, or adding a new driver can all impact your car insurance needs.
And other changes, such as renovating your home or buying expensive items, can also affect your home insurance, for instance.
To ensure sufficient coverage for all the changes in your life, keep track of important dates, such as when your policies are up for renewal or when major life events are likely to occur.
Review your policy by assessing your current needs and determining whether it meets them.
Working with a trusted insurance agent is also possible if you’re uncertain about your needs or require help reviewing your policy.
An insurance agent will help you understand your options, help you compare and update policies and notify you of available discounts.
Failing to Report Claims Promptly
Another mistake you must avoid is failing to report claims on time.
Many insurance policies have specific time frames for clients to report claims. Failing to report a claim within that outlined time frame can lead to loss of coverage.
Insurance companies need time to investigate claims and assess damages. By delaying the reporting of a claim, you are slowing down the entire claiming process and resolution.
So, even if the claim is covered and approved, any delays will delay payment.
Delaying the reporting of a claim can also lead to increased costs, a risk of fraud and legal issues. A delayed claim raises suspicions, making it that much more difficult for insurers to determine its validity.
Reporting insurance claims promptly is essential for all types of insurance, but here are some specific examples where it’s particularly critical:
- Health insurance.
- Car insurance.
- Homeowner’s insurance.
- Business insurance.
To report insurance claims promptly, you should contact your insurance provider immediately. They will guide you on what information you need to provide and what steps to take.
When reporting the claim, provide detailed information about the loss or incident, including the date and time, the location, possible witnesses and a description of the damages.
Once you’ve reported the claim, it’s a good idea to follow up with the insurer to ensure it’s being processed.
And lastly, keep detailed records of all your communications between you and your insurance provider and any expenses related to the claim.
You’ll thank yourself later when this information will ensure that you receive the maximum coverage you’re entitled to and can also help should you need to dispute a denial or inadequate settlement amount.
Not Understanding Insurance Terms and Conditions
The last mistake many find themselves making is not fully understanding the terms and conditions of their insurance policies.
Not understanding the terms and conditions of a policy may lead to you not realising what is and isn’t covered. You may also end up paying coverage you don’t need or duplicating an already existing policy.
You may need clarification on how premiums and excess work, leading to further confusion when you have to claim but must first pay your chosen excess amount.
If you don’t understand the terms and conditions of your coverage, this could lead to insufficient coverage, denied claims and misunderstanding of policy limitations.
Here are some specific insurance terms to look out for:
- Excess - the amount of money you, the policyholder, must pay before the insurance company begins to cover costs.
- Premium - the amount regularly paid to the insurance company to maintain coverage.
- Co-payment - a fixed amount your medical-aid scheme requires you to pay each time you receive healthcare services, e.g. appointments, treatments, procedures etc.
- Exclusions - these are specific events that aren’t covered under the policy.
Understanding insurance wording, such as terms and conditions, helps you avoid unexpected costs, denied claims or lacking coverage.
As always, it’s important to carefully read and review your policy documents, identify your coverage needs, compare policies and keep your policy up-to-date.
If you have any questions, even if they may seem insignificant, contact your insurance provider and have an agent clarify the policy wording.
You have a responsibility as a policyholder to ensure that your coverage is intact and you know what it entails.
Conclusion
Insurance can be valuable for managing risk and protecting your financial well-being.
Making a mistake in your insurance may lead to unexpected out-of-pocket expenses, denied claims, increased premiums, and even damage to your credit score.
To maximise your coverage avoid underestimating your coverage needs, not reviewing your policies regularly, failing to report claims promptly and not understanding the policy’s terms and conditions.
Avoiding these mistakes is crucial for the protection of yourself, your assets and your beneficiaries.
It’s essential to take the time to understand the insurance T’s & C’s, determine your coverage needs, compare policies from multiple insurance providers and ask questions about things that are unclear to you.
Also another way to avoid potential pitfalls is by keeping your policy up-to-date or working with a reputable insurance provider.
Working with a reputable insurance provider or agent can help you navigate the insurance process and find the right coverage to suit your needs.
With the right coverage in place, you can have peace of mind knowing that you and your assets are protected from unforeseen incidents.
Don't let an oopsie daisy turn into an oh-no catastrophe! Get your quote today and make your insurance blunder-free!
Pineapple (FSP 48650) is underwritten by Old Mutual Alternative Risk Transfer Insure Limited, a licensed Non-Life Insurer and authorised FSP. T&Cs apply. Premium is risk profile dependent.
Team Pineapple
Team Pineapple comprises our company’s top talents, who are dedicated to creating clear, high-quality content on essential vehicle insurance topics. This diverse group, including actuaries, accountants, data scientists, and insurance professionals across South Africa, collaborates to produce enlightening and empowering articles.
Each piece is thoroughly researched, factually accurate, and rigorously reviewed to ensure quality.
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