
Cutting insurance – a financial risk you need to avoid
Ryno de Kock, Head of Distribution at PSG Insure
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As disposable income continues to erode against ongoing economic pressures, people are becoming increasingly frugal with their spending. A more challenging economy may be a natural fit for trimming expenses, but cutting corners on your insurance could be a risk too costly. Underinsurance is already a prominent issue in South Africa, which poses a significant financial risk for both businesses and consumers alike. Underinsurance can often result in financial collapse, as the level of coverage they have in place is not able to make up for the loss incurred during an unforeseen event such as a flood, fire or theft.
“Insurance protects your most valuable assets against life’s many uncertainties and when disaster strikes, the right cover and level of insurance can provide a safety net,” says Ryno de Kock, Head of Distribution at PSG Insure.
His comments comes just a month after the National Financial Ombud Scheme publicly urged South Africans to avoid cancelling their insurance policies or defaulting on premium payments. Lead Ombud of the Non-life Insurance Division, Edite Teixeira-Mckinon, says keeping insurance cover is crucial, particularly during times of financial difficulty. de Kock couldn’t agree more, noting that insurance policies play a bigger role in financial security than most South Africans give it credit for.
Understand the risk of a higher excess
By purposefully choosing to inflate voluntary excess, you may be lowering your premiums, but de Kock cautions this should only be done with a clear understanding of the risks involved.
“If you can’t comfortably afford the excess amount when it comes to a claim, you may find yourself unable to access your insurance payout at all. And at a time when you need it most,” he explains. “This is a classic example of a decision that looks like a saving but can backfire in the worst way.”
Proactive risk management can lower premiums responsibly
A smarter approach is to actively reduce your risk profile. By improving security measures at your home – such as installing an alarm, electric fencing or CCTV – or adding a tracking device to your car, you could lower your premium without compromising your cover, if said security measures were not a policy prerequisite.
“Small investments in preventative measures often pay for themselves over time through reduced premiums,” de Kock adds. “But it’s crucial to actually use these security features, because insurers require evidence that they are in place and operational, especially when you claim.”
Check in regularly – not just once a year
Your insurance cover should change as your life changes. “We advise an annual review of your short-term insurance needs at minimum, but any major life event – like buying a new car, moving house, or renovating – should prompt an immediate conversation with your adviser,” says de Kock.
This ensures your assets remain adequately covered at their correct replacement value, avoiding costly surprises at claims stage. Failing to update your policy could leave you underinsured, meaning insurers will only pay a proportion of your claim based on outdated values.
Cheap premiums come with hidden risks
“Chasing the cheapest premium is rarely a good long-term strategy,” warns de Kock. “Cheaper policies often have stricter conditions, limited cover, or punitive exclusions.
“Working with a reputable insurer and experienced adviser is your best protection against disappointment when you need your policy to perform,” says de Kock. “Good advice will help you balance affordability and adequate protection, giving you peace of mind that your financial safety net is solid.”
Insurance should work for you, not against you
With expert guidance, de Kock says it is entirely possible to optimise your insurance, avoid waste, and save money all without jeopardising your financial wellbeing.
“Ultimately, insurance is there to protect you from the high costs of unexpected events,” de Kock concludes. “By managing your risk wisely, checking in regularly, and securing quality cover through a trusted insurer, you can avoid turning a short-term saving into a long-term setback.”