THE FINANCIAL
SERVICES BOARD
SHORT-TERM INSURANCE
Modern society requires the professional risk bearer, the insurer, to give a measure of certainty against the possibility of loss due to a contingency or unforeseen event. William Shakespeare’s expression
in Sonnet 3: “All losses are restored and sorrows end”, gives an apt yet robust description of the public good that the short-term industry has brought to our society. Short-term insurance transfers risk
from the generally risk averse public to the professional insurer thereby bringing peace of mind to the businessman and ordinary homeowner, alike, and makes the costs of daily life and conducting
business more certain.
What is short-term insurance?
Things to watch out for
Short-term insurance is insurance that you take out on your
possessions such as your house, car, cellular phone, furniture, etc. against loss due to events such as fire, burglary or
damage. You can also buy short-term insurance to cover your
health or disability events as well as a legal liability to others. The cost of insurance (premium) depends on what you
are insuring and the value thereof. You pay a premium every
month to buy you cover for that month. If you want to cancel
your insurance, all you need to do is give a month’s notice to
the insurer in writing.
If you have a bond, homeowner’s insurance
can be arranged by the bank. You are responsible for checking regularly that your
house is insured for the correct replacement
value. Remember, when you do not have a
bond, or you have paid it off, insuring your property is your
responsibility.
You can also take out short-term insurance on a specific item,
e.g. a DVD player, when buying it on hire purchase (HP). Most
shops will not let you buy an expensive item, such as a lounge
suite, on HP unless you already have insurance cover for the
contents of your house, or buy insurance through the shop.
The shop will often offer to arrange the insurance for you, but
you do have a free choice and not have to buy the insurance
through them. Always shop around for insurance cover that
best suits your needs.
2. Household Contents Insurance
This insurance covers the contents of your home against
damage caused by fire, storm, flood, theft, water leakage,
accident, etc. Some insurance policies have exclusions and/or
provide for an excess (the amount that you must pay in before
the insurance company will pay your claim).
Most short-term insurance policies that cover household contents require some sort of security system, e.g. burglar bars,
security gates or an alarm. Make sure that you know what
your policy stipulates and install what is required, or the insurance company can refuse to payout when you claim.
What is the purpose of short-term insurance?
Things to watch out for
The purpose of short-term insurance is to indemnify you
against losses that you may suffer as a result of events such
as accidents, crime, floods or fire. The purpose of short-term
insurance is to place you in the same position you were before
to the unforeseen event.
Make sure you value the contents of your
home accurately. Value your goods on a
new replacement value basis, which is how
much it would cost you to buy the same (or
equivalent) item. Sometimes, people think
they will save on their premiums by only calculating the value
of things they think are most likely to be stolen. This is unwise! If you do not value the contents of your home properly
you could be under-insured - and if you need to claim, you
will not receive the full amount of you claim because of the
under-insurance. Ensure that you have adequate cover and
adjust it regularly.
Tip: When you decide to insure your house, vehicle or belongings, work out how much it would cost to replace them.
This is the amount you insure them for. E.g. if you insure your
house for R600 000 and it burns down, you will not be paid
out more than R600 000. If your vehicle is insured at market
value, you can approach the insurer to adjust your premium
accordingly. Make sure you are insured for the correct
amount at all times-it is your responsibility!
What happens when you cancel your short-term insurance?
When you cancel a short-term insurance policy because you
disposed of the insured item or no longer wish to insure it,
your cover ends. You do not get a refund of premiums even if
you have never claimed. The insurer was on risk all the time.
What are some of the different kinds of short-term insurances
available in the market?
1. Homeowners’ Insurance
This is important insurance when you buy a house. It covers
against loss if your house (the actual building) is damaged
due to fire, wind, lightning, storm, water, etc. as well as the
fixtures and fittings such as tiles, fitted carpets, etc. Your bank
will insist that you buy homeowners’ insurance when you take
out a bond. They can arrange it for you or you can buy it
through a broker or directly from most insurance companies.
If your policy does not provide cover for subsidence and landslide or riot and strike, ask for that to be included. If there
are other exclusions in your policy make sure you understand
those exclusions.
Factors affecting your motor
insurance or premium
• The insured - your premium and cover take into
account your personal circumstances such as age,
claims history, etc.
• The type of vehicle - the premium and cover can be
influenced by the type of vehicle, e.g. the year, make,
model and value.
• The security fitted to your vehicle - check
whether the security you have fitted is acceptable to
your insurer.
• Where you live - insurance claims are more
frequent in certain areas due to higher risk factors.
• The place where the vehicle is kept, especially
overnight - chances of theft are lower if your vehicle
is locked and parked in a lockup garage.
• What you use the vehicle for - is it for driving to
work and back, private use or for business purposes?
Inform your intermediary (broker) or insurer if anyone
else will be driving the vehicle.
Different types of motor insurance
4.1 Third Party
If you have an accident and you are responsible, your
third party insurance covers injuries to other people
(including passengers) as well as damage to other
people’s property. Should a passenger be injured as a
result of your negligence, the insurance company will
cover his/her injuries too, over and above the Road
Accident Fund benefit limit.
4.2 Third Party Fire and Theft
This insurance provides cover for fire and theft, in
3. All Risks Insurance
There are some possessions which we normally carry with us
and which may be lost outside the home, e.g. cellular phones,
cameras, sunglasses and bicycles. Most household contents
policies offer an all risks section to cover these items, but
specific items may not be covered unless they are individually
listed in the policy together with their insured values. Check
with your intermediary (insurance broker) whether your insurance includes this type of cover.
4. Motor Insurance
There are different types of motor vehicle insurance. You need
to make sure that you value your vehicle properly when you
take out insurance. The value affects not only your premium,
but also your claim. Unlike household contents, the value of a
motor vehicle decreases every year and is mainly determined
by market forces, in other words, how much you could get
if you sold it. The rate at which it devalues is also affected
by things like kilometres travelled and maintenance of the
vehicle.
It is therefore important to adjust the insured value every
year so that it is accurate. If you fail to do this your vehicle
will be over-insured and you could be paying too much premium as a result – enquire from the insurance company or
intermediary.
addition to ordinary third party cover. You may be
required to pay an excess – please read your policy
document.
4.3 Comprehensive
Comprehensive insurance provides cover for damage
to your own vehicle combined with third party, fire and
theft cover. This gives you the broadest possible cover.
You usually have to pay an excess.
5. Legal Liability Insurance
This insurance indemnifies you against claims made
against you personally, usually for negligence of some
kind or another. For instance, someone may trip on a
loose tile on your front steps and suffer severe injuries,
and take you to court to claim for medical expenses,
loss of income, etc. As soon as you are aware of an
event that has occurred that might lead to a legal claim
against you, it is important that you notify your insurer
immediately.
Note: A certain amount of “legal liability cover” is
usually included in your household contents insurance
policy!
One last thing you need to know about short-term
insurance
One last you need to know about short-term
insurance
It is important to note that you cannot claim from more
than one short-term insurer for damage to the same
asset.
Your Rights and Responsibilities as a consumer of short-term insurance
Rights
Responsibilities
 It is your right to get a detailed
 You have the responsibility to sure
contract from the insurance company
that you only ever deal with insurance
within 30 days. The contract must tell
companies that are registered with
you exactly what you are covered for
the FSB. Make sure that the
and what you are not covered for.
insurance broker you are dealing with
is recognised by the insurance
company he/she represents.
 The contract must also give you the
 You have the responsibility to read
telephone numbers and the
through your contract documents
physical and postal addresses of
and understand everything. Ask your
the insurance company or your
broker if there is anything that you
insurance broker that sold the product
don't understand. If you still don't
to you.
understand, get someone to explain
everything to you in your own
language. You also have the
responsibility to insist on having your
documents written in clear and
simple language.
 Your contract must tell you the exact
 Do not sign any blank or partially
premium you must pay every month.
completed application forms.
It must also tell you on which day of
Complete all forms in ink.
the month that amount must be paid.
The contract must also tell you how
this monthly payment could go up in
the future.
 It is your right to know what the grace  Make sure you understand what is
period is. You normally have a 15said to you and what you agreed on
day grace period for late payment.
is confirmed in writing within 30
For instance, if you have to pay by
days.
the 1st of each month, you are
actually allowed 15 more days for the
premium to be paid.
 The contract must explain any
 It is your responsibility to keep your
special conditions that your
contract in a safe place.
insurance policy may have. It is also
your right to know what you are not
covered against under your insurance
policy that you have taken out. This is
called “exclusions” in your policy
document.
 You also have the right to know the
 You have the responsibility to give
amount that you must pay in before a
true and correct information about
company will pay your claim. That
yourself. You may experience
amount is called the excess.
problems with your claims if it is
found that some of the information is
untrue.
 You have the right to cancel an
 You are responsible to make sure
insurance contract within 30 days
that you pay your insurance every
after you have signed the contract
month. Remember, you will not be
and you are not happy with it. This is
covered if the premium is not paid!
called a "cooling-off" period in your
contract.
 It is you right to know how to make a
 Make sure that you know exactly
claim. Your contract will tell you how
how much the policy will cost each
the company's claims process works.
month and to include it in your
monthly budget.
 The contract must also give you
the telephone and fax numbers,
physical and e-mail addresses of
the Ombudsman for Short-term
Insurance. This is the office
where you go and complain if your
insurance company or broker
cannot resolve your complaint
Contacts details of institutions relating to Short-term Insurance products
and services:
The Ombudsman for Short-Term
Insurance
PO Box 32334, BRAAMFONTEIN, 2017
Tel: (011) 726 8900
Fax: (011) 726 5501
E-mail: [email protected]
The Ombud for Financial Services
Providers (FAIS Ombud)
PO Box 74571, LYNWOOD RIDGE, 0040
Tel: 0860 324 766
Fax: (011) 348 3447
E-mail: [email protected]
The SA Insurance Association (SAIA)
Box 30619, BRAAMFONTEIN, 2017
Tel: (011) 726 5381; Fax: (011) 726 5351
E-mail: [email protected]
Website: www.saia.co.za
The Financial Services Board (FSB)PO
PO Box 35655, MENLO PARK, 0102
Physical address: Riverwalk Office Park, Block
B, 41 Matroosberg Road, Ashlea Gardens
Ext 6, MENLO PARK, 0081
Toll-free: 0800 20 20 87 or 0800 11 04 43
E-mail: [email protected]
Website: www.fsb.co.za
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