Many people wonder what the difference is between short-term insurance and long-term insurance.

Some may think that it simply has to do with the amount of time that the insurance is valid for. Although there is some truth to this, there are some things that need to be clarified.

What is Short-Term Insurance?

Short-term insurance refers to all types of insurance policies other than life insurance. 

This type of insurance is classified as “short-term” because it’s likely that your insurance needs will change over time and, therefore, the policy will need to change too.

Most commonly, short-term insurance is only taken out for the period that it is needed, which may vary from a few months to a number of years.

Short-Term Insurance Examples

The fundamental purpose of short-term insurance is to cover the financial risks related to  your material possessions as well as those of your family.

Examples of short-term insurance include:

There are typically two types of home insurance that you can take out:

Homeowners or buildings insurance

Insurance of the actual physical structure of your home or against damage caused by:

• Fires
• Fallen trees
• Storms
• Lightning
• Floods
• Subsidence
• Burst geysers/ burst pipes etc.

Household contents insurance

Insurance of the contents of your home against theft and damage. These items can include:

• Appliances
• Electronics
• Garden tools or equipment 
• Furniture
• Golf clubs

Motor vehicle insurance

Insurance of your motor vehicle against fire, theft and damage. This typically includes minor bumps and scratches to hail damage and more serious accidents. The extent of your cover will depend on the type of insurance product you select.

However, there are typically three types of car insurance available:

•  Comprehensive Cover for environmental damage as well as damage that you cause to your own vehicle 
• Cover against fire and theft as well as damage caused to a person that you get into an accident with
• Third party cover which only covers damage to the other person involved in the accident

All risks insurance

Insurance of valuable belongings you carry around such as 

• Jewellery and watches 
• Laptops and tablets
• Cameras and camera equipment 
• Cell phones

Paying Premiums

When insurance companies talk about premiums, they are referring to the amount of money that you will pay each month for your insurance cover. Your premium is calculated according to your specific risk profile as an individual. 

For example, when insuring your vehicle, the insurance company will take a look at the following factors before deciding how much premium you will pay:

• Your age
• Your gender
• Your driving records
• The value of your vehicle
• Whether or not it has anti-theft devices such as alarms and trackers
• Where the car is parked during the day and overnight

The higher your risk profile, the higher your premium will be each month.

What Else is Available?

Short-term insurance doesn’t stop here. There are many additional extras that you can take out to ensure all your individual needs are covered. 

These are optional extras as not every person who needs short-term insurance needs these additional covers:

• Credit shortfall - this is an additional cover which covers any amount you are still owing on your financed vehicle should it get stolen or written-off
• Scratch and dent insurance - to avoid paying high amounts of excess, this cover allows you to have minor dents and scratches to your vehicle repaired
• Car warranty - this insurance pays for car parts that need repairing or replacement after they have suddenly and unexpectedly failed
• Personal accident - this insurance pays out a lump sum should you or members of your family become permanently disabled after an accident and in the event of your, or their accidental death

Olemera - Financial Advisors in Johannesburg

Short-term insurance is as important as long-term or life insurance as it protects you against unexpected events such as theft, accidents and natural disasters.

Replacing your belongings can be extremely expensive if you do not have insurance for them. Therefore, paying a monthly premium and a small excess for insurance claims instead, is a smart financial move.

Choosing a policy or the right cover for you may be difficult as there are countless insurance products to choose from. However, our financial advisors can provide you with expert advice while finding the perfect short-term insurance for you.

For more information about our financial services, or for advice on choosing the right insurance product, please feel free to contact us.