Common insurance myths

Insurance can be a tricky business and it’s probably because of this that there are so many myths floating around about insurance and how it works. Let’s bust some of these myths today…

My insurance will pay off my vehicle finance if my car is destroyed

If your car is financed, you will find that this is not necessarily true. When insurance companies pay for a written-off vehicle, the payment is based on how much the car is worth at the time of the accident. Seeing as your vehicle loan is based on how much your car was worth when you bought it, the insurance amount paid out may not be close to your loan amount because cars generally depreciate quicker over time – faster than the rate at which you are able to pay off your loan.

Your loan also includes financing fees and interest, which are not covered by your insurance. Some insurers might offer a top-up insurance policy that can cover most of the shortfall between the insured amount and the loan amount. This is usually optional, so remember to select this cover if you need it.

I don’t need insurance

Even if you are a fantastic driver or a very conscientious home owner, the fact is that accidents happen and possessions get stolen. Whether an event like this is your fault or not, it could cost you money that you might not have to get your car or home repaired or to replace your stolen items, for example.

There are a variety of insurers out there that offer a selection of prices and policies. In fact, getting a quote these days is quite painless and you get to find out just how much you will pay in the end. Everybody needs insurance and very few will be able to afford what they lost without the help of insurance.

If you are concerned, but are not sure how to proceed, it’s best to contact a financial adviser who can give you proper advice regarding your insurance needs.

My car’s colour will affect my insurance premium

Most insurers don’t care about the colour of your car. In fact, they are more interested in knowing whether you’ve had any accidents before, the type of vehicle you have, the car’s age and a variety of other factors.

To make sure, ask your insurer if they use the colour of your car to determine your premium.

I should get building insurance based on my property’s real estate market value

You should get building insurance based on the following:

• The amount it costs to rebuild your home, including the cost of materials and labour in the event that the building is completely destroyed. Plus
• The cost of debris removal. Plus
• The cost of professionals, like architects and engineers, who are needed when rebuilding a home.

Not sure how to approach this? Most insurers offer a building insurance calculator that makes it easier for you to work out the amount you should be looking at when taking out insurance. Financial advisers are also able to provide you with more guidance with this.

Discovery Insure offers comprehensive cover for your car and home. Our clients are rewarded with up to 50% of their fuel spend back every month for good driving. Join our nation of great drivers.

Discovery Insure Ltd is an authorised financial services provider. Registration number 2009/011882/06. Limits, maximum fuel and Gautrain spend limits, terms and conditions apply. Go to www.discovery.co.za for more details or call 0860 751 751.