Many young people today hold fast to the popular misconception that financial security is something to think about in the latter part of their lives.
Well-known phrases like ‘You only live once’ and ‘live your best life’ often reinforce a mindset of focusing only on the present and leaving no thought for future planning. Recent data shows that 48,1% of South African workers do not have sufficient liquid savings to cover at least 3 months of living expenses. A further 48,1% are not confident their insurance policies will cover them in case of an emergency. While living in the now might have its appeal, it is equally important for the youth to start planning now for a rainy day.
National Youth Month is an opportunity for young people to reflect on the importance of financial resilience and why insurance matters. Young people need insurance because it provides a way to bounce back from the financial shock of losing a key asset. This could be a phone, laptop, handbag, or, if you’re more fortunate, a car.
In addition, just as young people need to build a healthy credit profile to demonstrate that they are bankable, they also need to build a healthy insurance profile to demonstrate that they are insurable. The better your insurance track record, the stronger your case for a lower premium, so it’s never too soon to begin your insurance journey.
Young people usually claim vehicle damage or theft, house contents, and personal and portable items like cell phones and laptops. When considering what to insure, think about the items that would be financially devastating if they were lost or stolen. If you are a tenant, building insurance will not be a requirement because that is your landlord’s responsibility; however, you can still take out Contents insurance for things like your TV, fridge, and furniture, as these would not be cheap to replace.
When it comes to insurance for young people, it’s not only about what the insurance product covers but also how and why these products are suitable for them. Our younger clients value insurance that is affordable, easily accessed through platforms like WhatsApp or embedded in other products, and is suited to their modest asset base. They are also attracted to a culturally relevant brand that connects them to a broader vision and purpose. When these expectations are met, we are more likely to see a generation of young individuals build and secure their financial futures.
When comparing insurance policies, young people should look further than the amount of the monthly premium. Consider excess structures, types of cover provided, terms and conditions of the policy, value-added services, claim overturn ratio, and customer reviews. A reputable claim paying record should also be visible as this proves the insurer delivers on their contractual obligations.
The benefits of working with a broker offer you the guidance needed for navigating the insurance world as a beginner. Brokers have sound knowledge of the insurance industry and provide valuable advice on insurance matters ensuring their clients are adequately protected.
* Malumo is the head of product at Santam.
PERSONAL FINANCE
