It’s so easy to save money!
One of the “compulsory” forms of insurance that people with bonds have to have is Home Owners Insurance – this is insurance that covers the cost of replacing the building if it is destroyed through things like fire and floods. Usually the bank that provides the bond also very kindly arranges this insurance and the unsuspecting home owner signs the policy document. There are at least 2 huge problems with this:
Firstly , while this form of insurance is compulsory for those with a bond (and probably advisable even if you don’t have a bond) the insurance companies that the banks use tend to be very uncompetitive. If you ask the company that covers you for all your other short term insurance such as your car and house contents for a quote on your home owners insurance there is a very good chance that you could see a ±20% reduction in the cost of the cover. In this instance it makes no sense not to move and consolidate the cover with all your other short term insurance (just make sure you are getting like-for-like cover). I have recently had 2 experiences where the premiums have been reduced from ±R460 to ±R290 per month and from ±R226 to ±R175 per month – this is a substantial saving and in the second example, the bank was prepared to reduce their premium to match the quote from the outside insurers. All it took was 2 phone calls.
The second big problem with the bank arranging the cover is that the premium usually comes off your bond account each month – this is a huge rip-off because you are effectively paying interest on this premium over the life of the bond. Even if you don’t change the insurance provider get the bank to take the premium of your everyday banking account as opposed to your bond account – without even doing anything else you will knock years off your bond term. If you do change cover, it is likely the bank will want an endorsement on the new short term insurance contract noting their interest in the insurance – this is pretty standard practice.
If you have concerns about your finances or financial positions, you should be speaking to your financial planner.
