I recently received an e-mail from a forward thinking 25-year-old reader who wants advice on short term insurance, says Pieter Willem Moolman.

He is just starting out on his working career and wants to make sure that he has all his bases covered.

It’s almost impossible to give an in-depth overview of short term insurance in one column, but I’ll nevertheless dwell on some of the most important aspects. These facts apply to everyone.

Many people move around between different insurers just to get a lower premium, but, be warned, cheap premiums usually spell danger.

A prospective client should rather make sure that the insurer has the ability to pay out claims and that he can provide a quality service that includes speedy payouts.

Another important point is the cover that is provided. Although different insurers’ basic policies are relatively standard, there may be substantial differences in terms of extensions and excess payments among other things.

Your relationship with your insurer is another important component. Payment of “dubious” claims is much more likely in cases where there have been a lengthy relationship.

Also make sure you know what your broker’s service model is – in other words, what each party’s responsibilities are. Seen against the background of current legislation, a written agreement is recommended.

Such an agreement may include elements such as the service model, compensation structure and review intervals.

It goes without saying that your broker should be both qualified and licensed. Ask for personal details and make sure of his experience.

The next important question is whether your broker is accredited with enough companies to enable him to help you meet your objectives.

Also make sure your broker is covered by professional liability insurance. I wouldn’t feel comfortable with anything less than R5 million.

An experienced broker will also play a key role in making sure you have all the cover that you need.

Ask your broker to explain all the sections that are covered in the policy. Make sure he also points out any extensions and exceptions – the latter can prevent disappointment in the future.

Also ask your broker to disclose the excess amounts. Although cover with different insurers may be similar, the excess payable may vary considerably.

If you become aware of any situation that may lead to a claim, be sure to report it within the policy’s stipulated notice period. The policy holder is not allowed to make any acknowledgements, statements, offers, promises or indemnity payments – in other words, don’t acknowledge any wrongdoing, even if you were guilty.

Premiums are payable in advance and if it is not received on the due date, the insurer views it as being cancelled from midnight on the last day of the previous insurance period. Therefore, make sure that you always have enough funds available.

Pieter Willem Moolman is the owner of PWM Financial Management in Port Elizabeth. Visit www.pwmfb.co.za or phone 041 582 3034.