When last did you read your short-term insurance contract? This year I was surprised to discover that the excess on both my car and building insurance had increased. While the premiums had not gone up significantly, the portion I would have to pay when making a claim (the excess) had increased substantially.

Increasing the excess payable when making a claim is one way for insurers to keep premium increases lower in an environment where claims are increasing. However, for many policyholders this may come as a surprise when it comes to making a claim.

Listen to Maya discussing this topic with Karen Rimmer of PSG Insure in the My Money, My Lifestyle podcast.

The excess on my car insurance went from R3 000 to R4 000, which is a 33% increase. They introduced a R1 500 excess on claims due to a power surge while my general buildings excess increased from R500 to R1 000 – a 100% increase.

My monthly premium on my household contents decreased, which was a pleasant surprise, but the excess was increased from R1 000 to R1 500.

Karen Rimmer from PSG Insure says she is seeing a similar trend across all insurers. “In tough economic times, many people may not be able to afford their premium increases. Rather than cancelling and having no cover, they increase the excess.”

Rimmer says the insurance industry has been shifting some of the risk onto the client – perhaps in the hope that the client will take greater care of and responsibility for their property.

Read the fine print of your short-term insurance contract

This move means that more terms and conditions are being added to policies, so it is important to read the fine print and ensure you understand the requirements.

Insurers are trying to find a balance between increasing the entire premium significantly or introducing excess increases for specific, higher-risk events.

Power surge cover is a good example. As claims skyrocket, an insurer can either increase the premium for the entire building and contents, or they can include an excess which specifically targets power surge events.

This is possibly a fairer way of allocating risk. Rather than facing increased premiums, a client can mitigate the risk of a power surge by installing a power surge protector.

Rimmer says insurance has become more expensive globally as claims have increased, largely due to climate change.

South African insurers diversify their risk by reinsuring through global reinsurance companies, but these companies are increasing their rates not only due to global trends, but also due to factors specific to South Africa, such as loadshedding, riots, and a general decline in infrastructure.

Infrustructure is a major concern for insurers. This was highlighted during the KwaZulu-Natal floods, when poor maintenance of stormwater drainage and general infrastructure resulted in substantially greater damage and therefore more expensive claims.

Rimmer says areas like KwaZulu-Natal  are becoming difficult to insure, with insurers either significantly increasing premiums or even declining cover altogether.

Other factors include crime rates in specific areas and even the specific model of your car. For example, many insurance companies are now requiring clients who have a specific make and model of vehicle (Toyota being an example)  to install a tracking device and in some areas even a second device to increase the probability of recovering the stolen vehicle.

It is important to note that as part of the risk-sharing model, insurers may not pay if the event could have been prevented by maintenance and good housekeeping. For example, if you are claiming damage due to a roof leak, but the leak was due to broken tiles, your claim could be rejected. If your perimeter walls are cracking due to roots from plants, the insurer could argue that better maintenance would have prevented the cracks.

How to reduce your premium and excess

Firstly, carefully read your insurance contract and understand its provisions. If you have a broker, ask them to highlight any changes.

Implement additional safety measures such as car trackers and alarm systems.

If you are struggling to afford the premiums, think about items you can self-insure through your emergency fund. Your policy might list specific items that have their own premium attached, for example, as car keys. Find out the replacement value of these items and see if it’s something you can self-insure.

Another example could be your cellphone, which is expensive to insure. If it were stolen, could you afford to pay cash for a replacement? Maybe you could revert to an older phone until your contract is up for renewal.

Things I learnt reading my short-term insurance contract

When reading your contract, you may be surprised at some of the things your insurer will pay for, so it is worth knowing when you can claim. These are some surprising ones I noticed in my contract:

• Many insurers have a pensioner waiver on the excess. That means clients aged 55 and over do not have an excess on their car insurance.
• My insurer will pay for the removal of fallen trees due to a storm.
• I can claim for amounts owed to the municipality due to leaking pipes if the reading is 50% more than four previous readings. My insurer will also pay for leak detection.
• If I suffer an accident that leaves me in a wheelchair, I can claim for the cost of alterations to my home.

Many insurance companies offer a service to assess your household contents to ensure they are fully covered. We do this exercise every few years and it does provide peace of mind that we will be fully paid out in the event of a claim, as every item has been confirmed.

This article first appeared in City Press.