Recent research shows that the Household Saving Rate in South Africa decreased to -1.10 percent in the fourth quarter of 2023, down from -1 percent in the third quarter of 2023. This is not new, our savings rate has worsened over the years, and with the sluggish economy, consumers are facing significant financial strain. As a result, savings have become less of a priority.
Head of Short-Term Insurance at Standard Insurance Limited, Johan van Greuning says consumers who are struggling to save amid tough economic times should see their insurance as an opportunity to protect the savings they may already have.
Why short-term insurance matters
“Short-term insurance is designed to cover immediate risks and unexpected incidents that can otherwise drain your savings,” Van Greuning further explains. “We need to think of car, home, business and travel insurance as safety nets for life’s little surprises.”
Short-term insurance acts as a financial buffer, protecting you from sudden expenses that could disrupt your savings goals.
Consider this: You and your family have been saving diligently for the last two years to buy your new home. Without insurance, an unexpected car accident could force you to use those savings for car repair cost. This situation can be financially devastating, especially if the costs are high, delaying your plans for a new home. All of this could send you a few steps back in your savings plan.
Van Greuning adds that, “Having short-term insurance allows you to focus on your savings goals with less worry about potential setbacks. In essence, short-term insurance provides a safety net that supports both your immediate and future financial health.”
In addition to protecting against immediate expenses, short-term insurance can also provide a sense of financial security.
Hardy Ncube, Head of Personal Products at Standard Insurance Limited, notes, “Short-term insurance provides peace of mind knowing that you are safeguarded against unexpected financial burdens resulting from an insured event. It’s a crucial component of a balanced financial strategy, especially when savings are tight.”
“Insurance is not just a policy; it’s a proactive approach to managing risks, although it is important to understand that a short-term insurance policy is not a maintenance policy and consumers must take appropriate measure to maintain their cars and property.” adds Ncube.
“By integrating short-term insurance into your financial plan, you are essentially creating a buffer that helps preserve your savings and ensures that you can continue working towards your long-term goals without unnecessary interruptions.”
The power of long-term insurance
“Long-term insurance provides a critical safety net, enabling individuals to manage significant ,and sometimes life-threatening events and uncertainties without compromising their savings. It’s a vital tool for financial planning and stability,” says Kresantha Pillay, Head of Lifestyle Protector at Liberty.
Imagine being diagnosed with a critical illness such as cancer. The medical expenses can be overwhelming, potentially wiping out your savings. Long-term insurance, like critical illness cover, can assist in providing the necessary funds to cover treatment and recovery costs, allowing you to focus on your health without the financial stress.
“It’s also worth remembering that long-term insurance policies can serve as a financial cushion for your loved ones in the event of your untimely passing,” Pillay adds. “Life insurance, for instance, can ensure that your family’s financial needs are met and could be used to cover expenses like bond payments, education costs, and daily living expenses.”
A smart financial strategy
In addition to providing immediate financial support, insurance helps individuals stay on track with their long-term financial goals. By protecting your savings with insurance, you ensure that your funds remain available for significant life goals, such as your children’s education, buying a home, or enjoying a comfortable retirement.
Insurance is not just a safety net, it's a proactive strategy for financial resilience. By integrating insurance into your financial plan, you create a strong financial muscle that supports your journey towards financial security and peace of mind.
PERSONAL FINANCE