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Understanding your insurance liability

When taking out an insurance policy, it is crucial to know how much cover your policy provides. Understanding your insurance liability will prevent any nasty surprises and help you to choose the right level of insurance cover.

Many insurance policies include an excess payment. This is an amount for which the insured is personally liable. The policy holder must pay this amount before the insurer will cover the additional expenses. Generally, choosing a higher excess will result in a lower premium. However, this will mean that the policyholder will be liable for a larger amount in the event of a claim. It is worthwhile discussing the relative benefits of different excess options with an experienced insurance broker.

Your insurance liability will depend in part on the level of cover chosen. This is most clearly illustrated in the case of car insurance. A comprehensive motor insurance policy covers damage to both the policyholder’s own vehicle, as well as damage to property belonging to a third party.

On the other hand, more basic third party car insurance will only provide cover for damage or injury caused to third party vehicles or persons. Covering the cost of repairs to the policyholder’s own vehicle will remain the responsibility of the insured.

An important aspect of understanding your insurance liability is to be completely clear on how you will be compensated in the event of the loss of, or damage to, insured items. For example, if you have a home contents insurance policy, it is possible that your insurance cover will pay for the replacement cost of goods or only for the actual value of the goods. A lower level of cover will be available for lower premiums, but will leave you exposed to greater liability.

Ask your insurance broker to explain the different levels of cover and to give you detailed advice about your insurance liability as it relates to any policy you may choose to acquire.

African Independent Brokers provide competitive insurance in South Africa from top insurance underwriters. Contact African Independent Brokers for friendly expert insurance advice.

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