The concept of insurance is not the easiest thing to grasp, the idea of paying for security and protection for some is not the norm. Meanwhile for others insurance is as essential as groceries. Whether it’s your car, home, or valuable possessions, short-term insurance offers peace of mind by protecting against unexpected losses. Understanding how short-term insurance works and its benefits can help you make informed decisions about safeguarding your assets.
Meet Peter
Peter (not his real name) is a client of ours.
Peter is a husband, father, photographer, and adventure enthusiast. Growing up in a modest household, he learned the importance of hard work and frugality. His dedication and passion for photography led to a flourishing business, allowing him to invest in high-end camera equipment, this then lead to bigger projects, upgraded camera equipment, drones, a van and other business expenses.
Peter had gone from a cell phone camera hobbyist in high school to fancy SLRs and drones. Realizing the value of his possessions, Peter sought our help to protect them through short-term insurance.
What is Short-Term Insurance?
Short-term insurance provides protection for your belongings against potential risks such as theft, damage, or loss. By paying a premium, you transfer the risk of having to self-fund the replacement or repair of your items to the insurance company.
Some items have such a high value that we simply could not afford to replace it, like maybe your car. Insurance ensures you don’t have to bear the full financial burdern. Insurance may also be so affordable that people will insure items even though they can afford to replace it. It seems odd but some people they don’t want to use their savings to replace their cell phone they would rather pay a few rands a month and if it breaks or is stolen they can replace through their insurer.
Back to Peter’s story and his camera equipment, short-term insurance allows him to ensure each camera, should he upgrade and get a new camera he can simply add the new camera onto his insurance.
Insurance is like many other things, you get what you pay for.
How does it work?
Insurance is payable by premiums (monthly or annually); nsurance premiums are calculated based on the probability of a risk occurring. Insurance companies use statistics, risk factors, and research to determine these probabilities and set premium rates.
Being a photographer for Peter means having no fear of putting his life in danger to ensure he gets “the shot”. About a month ago Peter went hiking on a quest to find waterfalls. Along the journey, he dropped his camera from a ledge into a plunge pool below. The camera was damaged beyond repair thankfully Peter had insurance and could claim for a new one.
Peter’s story provides a clear example. As a photographer willing to take risks for the perfect shot, Peter insured his R20,000 camera for a monthly premium of R110. When his camera was damaged during a hiking trip, he was able to claim R19,500 after a R500 excess. Without insurance, Peter would have faced a significant financial loss.
4 Main Buckets of Insurance
BUILDING INSURANCE
Protects the physical structure of your property. If your house is bonded, it may already be insured with the bank, but you might find better rates by shopping around. Peter insures his R2,400,000 house for R335 per month.
CONTENTS
Covers household assets such as furniture, electronics, and appliances against damage or theft. Peter’s contents insurance costs him R366 per month, providing coverage for all items inside his home.
ALL RISK
Covers valuable items that leave your home, such as laptops, cell phones, and, in Peter’s case, camera equipment. This type of insurance was crucial for Peter when his camera was damaged during a hike.
VEHICLES
Covers all types of vehicles, including cars, motorbikes, and boats. Peter insures his two vehicles and motorbike, valued at R300,000, for a monthly premium of R639.
Live Trust Grow Matter
The information provided is not intended to address the specific circumstances of an individual and is for general information purposes only. Should you require financial advice please contact us.
