What is Short-Term Insurance? The Types and Why You Need It
Short-term insurance is a policy that provides coverage for a limited period of time. It is designed to provide temporary protection against risks like car theft, household goods damage, property damage, expensive medical procedures in hospital, protection against personal injury or liability claims, and more. A key characteristic is the limited time for which it provides cover.
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How do short-term insurance policies work?
You pay a monthly fee in return for financial risk cover against loss, damage or a claim against you. If your vehicle is stolen and you have theft protection cover for it, then the insurer pays out the agreed value for the vehicle. This makes it possible to replace the asset. The policy covers a large financial risk in return for a low monthly contribution, which is called the premium.
Why you need short-term insurance
It forms an integral part of long-term financial wealth planning. If you don’t have it and disaster strikes, you must have available funds to recover from the disaster. If you don’t have the funds, it may cause you to lose the asset without having the finances to replace it. This type of financial loss can put your financial well-being in the short and long term at risk, and you may end up never recovering from the loss or damage caused by it.
The most common types of personal short-term insurance policies include:
- Vehicle cover
- Property cover
- Household cover
- Personal liability
- Health cover
- All risks cover
Types of vehicle cover include:
Third-party – protects against claims from a third party for damage caused to their vehicle as the result of an accident in which you have been at fault as the driver of the other vehicle.
Third-party, fire and theft – includes the above, as well as cover for fire damage or theft of your vehicle.
Comprehensive – includes all the above, as well as damage to your vehicle because of an accident in which only your vehicle has been involved, hail, hijacking and vandalism, etc. according to the specifications of the specific policy.
Homeowner or property cover
It is a policy that covers risks to the property structure like damage caused by fire, flooding, hail, wind, earthquake etc. It also covers leaks or structural integrity issues. If you borrow money against your home or take out a home loan to buy property, the lender normally requires property cover.
This type covers the items on the property against theft, loss or damage as the result of theft, robbery, flooding, fire etc.
You cannot foresee the future and that’s why personal liability cover is important. Even if your vehicle cover includes third-party cover, if you made a mistake, which caused the permanent disability of another person in an accident, they can initiate a lawsuit against you for the damages. This is true for any type of accident, whether vehicle-related or not. These types of lawsuits often involve claims running into millions of rands. Personal liability cover gives you protection for up to a specific amount.
It differs from medical aid membership. With medical aid you pay a monthly contribution, and the medical scheme then covers the list of conditions and treatments specified in their package up to the amount they state in their offering. With health insurance, you are covered for a hospital stay, dreaded disease, etc.
All risks cover
This is comprehensive security to provide financial peace of mind as you have cover against a wide range of risks.
Related reading: Why you need short-term insurance
Where to get the best deals?
Make use of our financial planning and advisory services, which include help with the best type of cover at the most affordable price to meet your risk management needs. View our range of short-term cover services here.