Money Hacks: Insurance review case study

In Latest, Money hacks by Kristia van Heerden

In this week’s episode of The Fat Wallet Show we issued a challenge: why not use the free time we have during lockdown to finally go through the fine print in our insurance documents?

I have four insurance policies that need scrutinising. The one I neglected the most is the protection policy I had to take out to cover my bond in the event of disease, disability or death. 

I’ve had dread disease and disability cover in my personal capacity for many years. This additional cover was therefore a grudge purchase to the greatest degree. Banks won’t issue a bond unless you have this cover in place. At the time that I took out this cover I was also dealing with a house transfer that was going poorly, so insurance was last on my list of priorities. 

When I decided to take on this challenge, I knew this was the one policy with which I had to spend some quality time. Boy, am I glad I did! Here’s what I discovered:

  • For one thing, I thought this cover included some sort of building cover. It does not. If you are wondering why I thought this, get in line. 
  • Secondly, I’m a contract worker. I invoice the same amount to the same company every month, but I’m not a PAYE tax-payer and I don’t contribute to UIF. I noticed that I’ve paid over R500 in retrenchment cover since I took out this policy, which wouldn’t apply to me if I lost my income. This has since been queried and cancelled. The R500 lost is the price I pay for not reading insurance documents properly.
  • Thirdly, I noticed a pretty big caveat in terms of disability cover for contract workers: if you become disabled in any way other than losing both hands, both feet, one of each or went completely blind, the policy wouldn’t pay out. I queried this with the insurer, who assured me I’ll have full cover in the event of any disability, not just the most horrific kind.
  • I also noticed the policy won’t pay out if you had a pre-existing chronic condition, which I have. The problem is, I don’t remember if anybody asked me about that when I took out my policy. Since I didn’t see any mention of this in my policy wording, I queried it. The insurer assured me that, while a two-year exclusion applies, I will be covered for pre-existing conditions after two years. I’ve requested a new policy document, back-dating that cover to when I took out the policy. 
  • While my insurer didn’t fail to increase my annual contribution by 5%, they did fail to update my amount insured to the new bond amount. If the policy is intended to cover your outstanding bond amount and you spent a year paying money into your bond, the amount insured surely needs to decrease. Funny how that never came up. Insurers are very quick to penalise us for under-insuring and not very forthcoming when we’re over-insured. 
  • Lastly, I went to Cuba and bought some cigars there. I posted a picture of myself smoking one on Instagram. According to my policy document, they are allowed to reduce my benefit payment by 10% should I claim and they can prove I smoked. Even though I don’t smoke cigarettes, I didn’t want to take a chance on this one.

While the removal of the retrenchment benefit and reduction of the amount insured decreased my benefit, the change in smoking status resulted in my premium being increased by just under 15%. Obviously a premium increase is not what one has in mind when doing this exercise, but knowing I have my ducks in a row should I ever need to claim on this product does bring me peace of mind. It also gives me a great checklist for when I start shopping around for a cheaper option. 


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