Insurance Tips: We Share our Expertise

The basic concept of Insurance has been around for thousands of years, with the first known insurance agreements made by merchants to protect their shipments. But just because insurance is as old as time, it doesn’t mean that it is an easy topic to understand.  Many people get confused about what they need to insure and at what value, easily getting frustrated with the whole system in general. So, in order to make things more manageable, we’re breaking down the basics of insurance and providing insurance tips so that you can decide which insurance packages are best suited for your needs.

What is Insurance?

Simply put, insurance is a ‘rainy day’ fund for when something unexpected happens and funds are needed immediately.  Think of it as a sort of piggy bank, where you put a little bit of money aside each month or year, for example to achieve some sort of goal, let’s say the vacation of your dreams. Now, it’s very easy to start feeding off of your saved funds, so you put terms and regulations on yourself to help you use those funds better.  For example, your fund can only be used for travelling and not to buy those pair of shoes you saw on eBay.  Another term could be that you can only use the funds once you’ve graduated, so as not to get distracted by travelling and not finish your studies.  It’s also important to understand that the fund is there to save up for flights and hotels, and does not include expenses such as sightseeing or eating out.

Insurance works pretty much the same way, but instead of putting funds away for a trip, it’s there just in case something goes wrong, such as your car breaking down, or a plumbing disaster.  It’s basically protecting you from Murphy’s law, which states that anything that can go wrong will go wrong.  Most of us don’t usually have the funds readily available when such disasters happen precisely because of their unexpected nature.  With insurance, instead of putting money into a piggy bank, you are making an agreement with your provider that should something happen, funds will be provided for you.  The money you pay your insurance provider each month goes into a large joint pool made up of the funds from the ‘many’, from which the insurance provider will be able to pay the claims of those who suffer a loss.

Always Read your Insurance Policy

And just like you have regulations to safeguard your travel fund, insurance policies lay out the terms which include what is being insured, and in which cases a claim is valid.  This is why it’s important to understand what your insurance policy offers.  Your insurance provider may have different packages that cover different things, depending on how much protection you’re looking to have, and of course how much premium you’re willing to pay.

Similar to your travel fund that doesn’t include eating out or extras, that insurance fund might only cover you for certain expenses, or for a percentage of the total cost. For example, when you take an insurance policy out on your car and then make a claim, you will need to pay a fee out of your pocket.  This is called excess.  Why do insurers do this?  The same reason why you will get a discount if you don’t make a claim. Because it helps customers to keep their premiums low and encourages claims only in cases of a more sizable loss. Remember, its’ better to save up for the flights than for the meals out when on holiday.

Murphy’s law

Nowadays, insurance has become so important that certain insurance products are required by law as is the case with car insurance.  Similarly, banks will impose home insurance if you take out a loan with them. This doesn’t mean that unless insurance is imposed by some greater authority, you don’t need it.  Let’s go back to Murphy’s law.  Anything that can go wrong will go wrong.  Suitcases will get lost, water pipes will break, items will get stolen, and you will, unfortunately, find a dent on your brand-new car after parking it on the street.

It’s all about calculating the risk, and deciding whether to insure your car for third parties only, or comprehensively for damage to your car too; to insure your home even if you have no bank loan; as well as to protect your health in case of illness.  For example, you may rather pay a bit more every month, than have to scrap your car when you cannot afford the repairs in case of an accident. And just like you calculate your risk and which policy is best for you, the insurance providers calculate their own risks too.  This is what determines the value of your premium.

Another important factor when calculating premium is the value of the items insured, and as insurance works on actual values, it’s important to be precise.  In fact, sometimes insurers will send in surveyors to establish the true value of things to make sure everything is fair.

Insurance Tips

All this may be confusing, so we’ve compiled a short list of insurance tips to help you calculate the value of your assets, and help you when insuring your valuables:

1. Consider that you’ve calculated the risk and decide its best to insure your car or your property. However, you don’t want to pay so much every year and you tell your insurance company that your house is worth €200,000 when its true replacement value is €400,000. This means that if something happens to the insured house, you will only receive half the amount you are claiming, because you are underinsuring by 50% and not reflecting the full replacement value, so be sure that you are declaring the actual value to avoid this scenario which is referred to as ‘the condition of average’.

2. Imagine you have bought a home either in shell or finished form, but you need to take out a loan to pay for this. The bank will ask that you have home insurance before you sign the contract. Naturally, you take out home insurance on the four walls that make up your property.  Once the contract is signed, you start making the house your own, painting walls, buying furniture and perfecting it with your own personal style.  Don’t forget to update your insurance policy to reflect the real value at risk, which reflects the new furniture you have,  in order to be certain it is all adequately covered by the insurance policy.  You can, of course, choose to insure just the building itself, which makes up your home (without the contents cover), but then you’re not going to be paid for any damage to furniture or belongings in the event of a loss.

3. Don’t forget to update the value of your car! If your car was worth €30,000 when you bought it 10 years ago, unlike property, the value of your car is going to decrease.  One of our top insurance tips is to make sure you adjust the value of your car so as not to pay extra premium and only get paid for its current value in a case of a claim.

At Laferla, we actively assist and remind our clients when it comes to updating the value of their goods.  Priding ourselves on our brand value of trust, we hope that our insurance tips will help you next time you need an insurance policy.  For more information on our vast range of insurance packages, visit our website, get a quote online, or simply get in touch.

Laferla Insurance Agency Ltd. is enrolled under the Insurance Distribution Act, Cap 487 to act as an Insurance Agent for MAPFRE Middlesea p.l.c. (MMS). MMS is authorised by the Malta Financial Services Authority (MFSA) under the Insurance Business Act, Cap 403 of the Laws of Malta. Both entities are regulated by the MFSA.