Four essential questions to ask your adviser when shopping around for insurance

Johannesburg - Taking out insurance is not only an important step towards protecting valuable assets, but also an integral part of sound financial management. Kickstarting the process and figuring out the industry jargon may be overwhelming at first, but advisers can play a key role in helping clients understand how to make their insurance work for them in the most effective ways possible.

Commenting on this is Karen Rimmer, Head of Distribution at PSG Insure, who encourages anyone new to the world of insurance to ask questions and build a close relationship with a trusted adviser.

"From understanding the terms and conditions of a policy, to getting clarity on potential risk scenarios, advisers can fill knowledge gaps and help clients make informed decisions. Advisers are more than just product experts – they are equipped with the tools and expertise to help clients put the necessary safeguards in place to manage risk across several levels," she adds.

Newcomers to the industry may be wondering where to begin when first approaching an adviser. To get started, Rimmer advises clients to ask their adviser these four questions:

Do I really need insurance? 

It's no secret that insurance is often viewed as a 'grudge purchase' that involves paying money towards a scenario that hasn't yet (and might never) occur. However, Rimmer urges South Africans to adopt longer term thinking. "As you grow – in your career and personal life – you begin to amass assets of value. A house is a good example. Owning property is not only something that people stand to benefit from in the present but also something that will continue to add value to their lives as they evolve. Acquiring a property is just the first step of many necessary steps in building wealth and for that reason, its value as an asset needs to be protected.

Risks to a home can come from multiple fronts, including natural disasters such as storms, as well as accidents involving fire, which could lead to substantial damage or even the complete destruction of the property.

In these unfortunate scenarios, the financial setback can be devastating and can jeopardise the financial standing of any homeowner, forcing them to rebuild or reinvest in an asset that could otherwise have been recovered or restored. Insurance provides a safety net. And in a world that is so uncertain, it is one of the most effective ways to protect your financial future," says Rimmer.

How can I make insurance affordable for myself?

One of the biggest misconceptions amongst newcomers to the world of insurance is that it is typically unaffordable and that the pricing of products is standard. On the contrary, insurance products are priced on a case-by case basis, taking into account an individual's unique risk profile.

One of the first things to discuss with their adviser is how insurance can be tailored to their needs and their budget. Advisers are in the best position to source quotes from multiple insurers while comparing the terms and conditions offered by those insurers and can make a recommendation on which option provides the most comprehensive cover and value.

How do I choose the best insurer and policy?

Advisers play a pivotal role in helping clients choose an insurer that can provide the best products and services. At the beginning of the process, they perform a needs analysis exercise that takes multiple factors into account, including the client's financial goals, the value of their current assets and which risks they need to obtain cover for.

"Many clients make the mistake of opting for the cheapest premium, but, as advisers often suggest, the lowest premium doesn't always offer the adequate amount or type of cover. There may be shortfalls in the cover that clients need to be made aware of. Making the right decision from the outset can save clients a substantial amount of money, time, effort and valuable resources in the long term. Access to this kind of information is one of the biggest advantages of working with an insurance adviser," says Rimmer.

What are exclusions and what do they mean for me?

Every insurance policy includes certain risks that are excluded or deemed uninsurable, and it's important that clients are made aware of what these exclusions are. For example, war and damage caused by nuclear substances would not be covered under a traditional insurance policy.

Electrical damage caused by a potential grid failure, is another risk that is not covered by most insurance policies. The good news is that there are certain measures clients can take to protect their assets against these 'uninsurable' risks from their side. Advisers are able to share guidance on steps that can be helpful, like installing surge protectors.

Before agreeing to purchase any insurance policy, the topic of exclusions and what to watch out for should be well understood.

As Rimmer concludes: "Exclusions are just one example of a factor that clients need to have a comprehensive understanding of. It's also important for clients to ask their adviser to explain their policy wording as well as terminology such as 'duty of care, excess, coinsurance' and 'deductible' before signing the contract. Doing this due diligence from the very beginning will ensure that their relationship with their insurer can be built on a foundation of trust, reliability and transparency."