With prices and interest rates still eating into their budgets, consumers are looking for ways to cut expenses but insurance must not be cut.
You might think short-term insurance does not fit into your budget but it should. After last week’s announcement of an increase in VAT, many South African consumers wonder what the impact will be on their budgets.
The 0.5% VAT increase for 2025/26, followed by a further 0.5% increase for 2026/27, means that VAT will increase to 15.5% this year and 16% in 2026.
Ryno de Kock, head of distribution at PSG Insure, says while this could cause more strain on our pockets, it is important not to abandon your financial plans and in particular short-term insurance cover.
“Insurance is often considered to be intangible but overlooking the value it can bring when you need it most, can have far-reaching effects.”
Life is unpredictable, he says and accidents or unforeseen events tend to happen while we are busy making other plans, as the saying goes. Short-term insurance serves as a safety net, providing protection and peace of mind in the face of unexpected emergencies and costs.
“While it may seem like a luxury item in your budget that you might not need in the present moment, the long-term benefits of having comprehensive insurance coverage far outweigh the costs.”
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You need insurance if you are the victim of a crime
When it comes to the financial consequences of crime, or after a natural disaster like a fire or flood or even if the geyser bursts, there are many expenses to cover, which are much harder to face without insurance. If you are still paying off a loan for your vehicle or property and disaster strikes, you could find yourself in terrible debt, De Kock warns.
“Without insurance to cover losses, you would be left to shoulder the burden of replacing your assets while continuing to meet your loan obligations. And even if you have paid off your car or home, the repair costs could be high and are unlikely to be easy to manage within your monthly budget.
“To have to rely on credit or borrowing from your long-term savings to manage something that could have been covered by insurance, does not make good financial sense,” he says.
“Even if you have access to a substantial sum of money, depleting your savings to cover such expenses could have long-lasting repercussions for your financial stability. Keeping insurance in place safeguards your future self against the financial impact of unexpected setbacks.”
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Finding affordable short-term insurance
De Kock says it is entirely possible to find affordable insurance cover and it is 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 can help you to strike a balance between comprehensive coverage and affordability by looking holistically at your needs, such as where you live and work, the car you drive and the items (contents) you need to insure.
It is important to keep in mind that the cost of items like appliances, clothing and furniture tend to go up in price each year, usually due to inflation and import costs. That is why it is required to regularly keep track of what you own to ensure your insurance cover protects your possessions effectively.
“Hopefully you never have to claim on your insurance policy, but it is better to be prepared for unforeseen events than to face financial hardship that could have been prevented. We live in a country that is full of surprises and therefore prioritising insurance, with the help of tailored advice, is a proactive step towards protecting yourself and your assets against any uncertainty,” De Kock says.
