In our fast-paced world where financial responsibilities can sometimes feel overwhelming, it can be tempting to cut corners and skimp on expenses wherever possible. One area where individuals often consider cutting their costs, is short-term insurance. After all, insurance is something intangible, something you pay for but may never directly benefit from unless a claim arises. However, says Karen Rimmer, Head of Distribution at PSG Insure, overlooking the value of insurance can have far-reaching consequences, potentially leading to significant financial losses in the future.
“The reality is that life is unpredictable, and accidents or unforeseen events can happen when we least expect them. Short-term insurance serves as a safety net, providing protection and peace of mind in the face of unexpected emergencies. While it may seem like an unnecessary expense in the present moment, the long-term benefits of having comprehensive insurance coverage far outweigh the initial cost.”
One of the key reasons not to aim to save on short-term insurance is to mitigate risks associated with major assets such as your car or home. If you are still paying off a loan for your vehicle or property and disaster strikes, you could find yourself in a precarious financial situation.
“Without insurance to cover the damages, you would be left to shoulder the burden of replacing these assets while continuing to meet your loan obligations. The financial strain of such a scenario could be overwhelming and potentially derail your long-term financial goals,” Rimmer says.
Moreover, the absence of insurance can result in significant costs to get back on track financially following an unforeseen event. Even if you have access to a substantial sum of money, depleting your savings to cover expenses that could have been insured can have long-lasting repercussions on your financial stability.
“By investing in insurance, you are safeguarding yourself against the financial impact of unexpected setbacks,” she adds.
When it comes to finding affordable insurance cover, it is crucial to prioritise this expense in your budget, and it’s worth consulting an insurance adviser who can assist you with ‘shopping around’ for the right cover to meet your needs – and your pocket.
“An adviser helps you to strike a balance between comprehensive coverage and affordability. By taking a holistic look at your needs, such as the car you drive, where you live and the contents you need to insure, an adviser can guide you appropriately,” Rimmer says.
For example, when selecting car insurance, you can opt for a specific excess on your policy, which could reduce your premiums, provided you have a savings set aside that can cover the excess if you need to claim. Rimmer notes that by choosing a higher excess, you reduce the immediate out-of-pocket costs in the event of a claim, while the insurer covers the bulk of the expenses.
Another example of where you could save is on your All Risk cover. Your cell phone may be the latest model, but it decreases in value the older it gets and so therefore, the replacement cost could be adjusted over time, to bring your contents insurance down. “Generally, however, the cost to replace our most loved items from couches to clothing, goes up due to inflation and import costs, so this is why it’s important to regularly keep track of what you own to ensure you cover your goods effectively, should you need insurance to replace them after an unexpected event.”
While the hope is that you never have to make a claim on your insurance policy, it is better to be prepared for unforeseen events than to face financial hardship in the aftermath. Prioritising insurance is a proactive step towards protecting yourself and your assets against uncertainty and unforeseen risks.
“And consulting with a financial adviser not only helps you identify the most suitable insurance options based on your circumstances but can also help you align insurance coverage with your financial goals.
Insurance plays a vital role in wealth building as it acts as a safety net to protect your assets and your finances.
Remember, it is always better to be safe than sorry when it comes to spending on cover for your assets, while securing your financial well-being,” Rimmer concludes.
PERSONAL FINANCE