Why underinsurance hurts most in December

Why underinsurance hurts most in December

By Johannes Hesekiel|

December feels like a reward. After eleven months of routine, it arrives with travel plans, new purchases, family gatherings and a general sense that the rules of ordinary life are temporarily suspended.

What most people do not think about as they prepare for the December holidays is their short-term insurance.

The festive season is, statistically, the worst time of year for the events that short-term insurance exists to cover. Roads are busier and more dangerous. The combination of higher traffic volumes, long-distance travel on unfamiliar roads, and festive celebrations creates conditions that produce more accidents than any other period on the calendar.

Homes are left unoccupied for days or weeks at a time, making them significantly more vulnerable to break-ins. And on the other hand, celebrations mean more people in the home, more activity, and a higher likelihood of accidental damage.

And the summer heat brings its own risks: storms, flooding, and electrical faults that can cause damage with very little warning.

None of this comes as a surprise. Yet December is also the time of year when the gap between what people are insured for and what they actually own is often at its widest.

The reason is simple. December is when people upgrade. A new television for the living room. A laptop for a child heading to university in January. A camera for the holiday. New jewellery. New appliances. New gifts for friends and family.

People spend more in December than in almost any other month, and most of those purchases are made without a single call to an insurer. The new television sits in the living room, unscheduled. The laptop goes into the bag, unregistered.

The jewellery goes into the drawer, uncovered. The new car gets parked in the driveway, uninsured.

Short-term insurance policies are not automatically updated when your circumstances change. A policy taken out two or three years ago reflects the value of what you owned two or three years ago.

If your household contents have grown significantly since then, through gradual accumulation or a concentrated burst of festive spending, your current cover may hold very little similarity to your current exposure.

Technically, you’re insured. The problem is that you may not be insured for everything you own today.

This matters most at the moment of a claim. Underinsurance does not become visible when you pay the premium. It becomes visible when something goes wrong and the payout reflects what the policy covered rather than what was lost.

That is a discovery best made before December, not during it.

The practical steps are not complicated. Review your policy before the festive season begins. Notify your insurer of significant new purchases.

If you are travelling, understand what your policy covers away from home and whether your vehicle cover is adequate for a long-distance trip.

If your home will be unoccupied, check what your policy requires. Some policies have conditions about unoccupied properties that policyholders are unaware of until a claim about a break-in is rejected.

December rewards the prepared. The accident, the break-in, the storm damage – none of that check whether it is a convenient time. They arrive regardless. The question is simply whether the cover in place reflects the life that actually needs protecting.

– Johannes Hesekiel is the Sales and Underwriting General Manager for Old Mutual Short- Term Insurance, at Old Mutual Namibia.