The huge hike has effectively brought an end to the decelerating CPI (Consumer Price Index) that we’ve experienced over the last few months. As a result, we can expect to see a gradual increase in both the prime interest rate and in overall inflation over the course of the next financial year, and we can expect to feel it even harder at the tills.
“It’s clear that South African consumers are in for a difficult second half of 2015. That said, as consumers scrutinise their monthly budgets looking for expenses to cut, they should think twice about cancelling their insurance policies,” says Janse van Rensburg who adds that when times get financially tough, it’s important to make sure you’re not leaving yourself financially vulnerable by exposing yourself to unnecessary risks.
Janse van Rensburg’s definition of taking an ‘unnecessary risk’ includes not having medical aid, not properly planning for your retirement, neglecting to save a portion of your salary every month, and- of course- being underinsured.
“With the increased number of motor vehicles on the road, motorists are more likely to have an accident than in the past. Your monthly insurance premium or excess payment is a minimal expense when compared to trying to replace your entire car should it be written off in a car accident,” says Janse van Rensburg.
Burglaries, robberies, hijackings and petty theft are also on the up so insuring your valuables has become a necessity. Aside from the risk of having your car or any other possessions stolen, there is the possibility that something else could go wrong, such as a burst geyser or even a fire.
Janse van Rensburg urges South Africans to carefully consider which of their monthly expenses are necessities, and which are luxuries. “We don’t have any control over the future, but we can use financial forecasts to help us protect ourselves from major losses during the coming storm,” he says.
Budget Insurance recommended that consumers follow the steps below to free up a few extra rands every month, without leaving themselves exposed to financial loss:
- Monitor your expenses and get a clear idea of where your monthly income goes. Make an effort to eliminate any unnecessary expenses. These could include: making your own lunch, joining dinner clubs instead of eating out or car-pooling to work;
- Insure your vehicle for the correct value. While Budget Insurance takes into account the vehicles depreciated value, not all insurers do, so make sure your vehicle is insured for the correct value;
- When it comes to home contents insurance, opportunities to reduce coverage could lie in carefully and regularly updating household inventories. Review your household inventory every six months and adjust the total insured sum accordingly. When you calculate the insured amount of your home contents, make sure you are using replacement values and not market values. Remove old and discarded items that no longer need to be insured from your inventory list. Why should you pay for cover on a computer that stopped working in 2011? Similarly, the costs of some appliances and gadgets have come down in price so you really shouldn’t be paying to insure an item that was more expensive when it first hit the market than it is nowadays;
- If your short-term insurance company offers free roadside assistance, you needn’t opt for the same benefit from your medical aid provider, and if your cellphone is insured under your home contents, you shouldn’t be paying for separate cellphone cover;
- You could reduce your car insurance premium if you’ve fitted your car with additional safety features such as a tracking device or an alarm, for example. You could receive a reduction on your home insurance premium if you’ve invested in new alarm system for your home or if you’ve recently moved to a safer neighbourhood; and
- You could save some money on your insurance by increasing the excess you pay when you claim. Ideally, you want to pay the lowest excess you can in the event of a claim. However, opting for the lowest excess might make your premium too expensive for you. Best practice is to find a balance where you’re paying a reasonable premium and your excess is not too high that you won’t be able to cover that amount should you need to make a claim.