Non-Life Insurance

As we progress in life and begin to get some form of income in the form of a salary or from some form of business activity, we generally embark on a long process of acquiring the things we need to better our lives. This is a very challenging process laced with several pitfalls that have consequently led one too many to financial ruin, if not approached with care. Often, we discover it a bit late that we may have started on a wrong footing, acquiring the “wants” and neglecting the “needs”.

Peer pressure

The excitement of getting a constant income gets the better of us and the need to be seen and accepted by our peers as having made it in life often lead to our inevitable downfall. When peer pressure sets in, we often get driven by the “can you see me syndrome” and how our so-called friends perceive us in society. The urge to display one’s buying power in society often overcomes the logic of using our money sensible.

Impulse buying

The next thing we know, we have moved into some rented accommodation, bought a bed, a few blankets, a fridge – to keep the beer cold – and a brand spanking new car. Most of the expenses that run in tandem with these acquisitions become an after-thought and an unnecessary burden on your finances. Only a few people would truly take their time to look at their financial position, apply budgeting principles and see what they “need” and differentiate those from what they “want”. The difference between these two is explained under budgeting, later in the article.

The dangers of choosing to ignore

Such mistakes are not only limited to the young who have just started work, but millions of adults have also fallen victim to several financial difficulties or challenges that have left their financial literacy or budgeting skills open to questioning. We often budget on the procurement of an asset, whether it’s a bed or a car, but most times, deliberately ignore or forget to protect what we are acquiring. This is mainly a result of two things. Either you are aware of the benefits of protecting the assets you are acquiring and the consequences of not protecting them, but all the same, choose not to or you have limited know-how of such products.

When we go through the process of asset acquisition, we either do it through a hire purchase or loan agreement with a finance house or we pay cash. Most hire purchase transactions will have some form of cover or insurance whose function must be clarified to the buyer, unlike cash purchases. When one buys an asset for cash, they either choose to sign up to some form of insurance or they may just load their asset up in their car and take it home. All responsibility and full ownership shift to the buyer immediately upon taking delivery.

Peace of mind through an insurance cover

With hire purchase, there is some sense of shared responsibility on the asset. As the buyer, your responsibility is to ensure that repayments are made as agreed with the loan originator, the asset is also insured and kept safely at the registered residential address. One thing to note is the fact that insurance cover is always over and above the hire purchase amount and most people always forget to factor this in their budget.

This asset cover or insurance that one pays for their asset, whether bought for cash or through hire purchase falls under  Non-Life insurance. It gives one a peace of mind, that should anything happen to that asset, whether it is stolen, or it is burnt up in a fire that is beyond your control, your insurer is able to replace that asset for you, depending on the policy conditions.

It is vital that one fully understands their financial obligations, and this is easily done through the acquisition of budgeting principles and financial literacy.