insurance explained

Penta Broker Services is an independent insurance brokerage that provides short term insurance services from the following insurance and financial services providers:

This means that we serve to provide you with a wide range of insurance products from a selection of the top insurance companies and financial services providers. We search through all the policies and cover options available to find you the best cover for you or your business.

What is insurance and what is the difference between long term and short term insurance?

Insurance is simply the transfer of risk. You transfer the risk or loss, to an insurer and pay a premium to have that risk insured.

Let’s look at your car for a second. Do you still owe money on it? In effect, the bank owns the car - you just get to drive it until you have paid the bank back. But there is a real risk that your car could be involved in an accident or even stolen.

What then? You are left sitting with a damaged vehicle, or no vehicle at all, still owing the bank a whack of money!.

Can you imagine strapping on a pair of old and dusty Nike running shoes, during a particularly freezing Highveld winter, and jogging 50km to work and back, every morning, while still paying off the luxury German car you no longer have the pleasure of driving?

It’s too much of a risk to roll like that, isn’t it?

And that is exactly why we insure our vehicles. We have the risk of loss, we hand that risk over to an insurer, who, for an exchange of money (premiums payable on a monthly basis) will take on your risk.

The transfer of risk is easy enough to understand, but are there any specific differences between types of insurance?

What is the difference between your car and home insurance contract and your life assurance policy?

Insurance can be divided into two basic categories: Short term and Long term insurance

Within each category there are a number of different types of insurance, such as:

  • car and home insurance or
  • life assurance

The major – but not defining difference – would be that with a long term assurance policy, you are looking to insure a person over the long term. With short term insurance you are covering possessions for the short term. Remember that with any type of insurance cover, you are covering either a specific item or a specific eventuality.

So are we suggesting that any item you insure for a long period of time is deemed to be long term insurance? Does that mean if you insure my home for thirty years it’s covered under a long term insurance contract? After all, 30 years is a long term.

Not quite. The time period you are insured for is not what defines the type of insurance.

Below is the fundamental distinction between long and short term insurance:

When a life is insured [ termed as life assurance ] it is deemed to be long term insurance but when it’s any other item, besides a human being, that’s being insured, it’s deemed to be short term or general insurance.

So while you might have a house insured under your short term home owner’s policy, for 20 years, because you are not insuring a life, it is short term cover.

The Essentials of Short-Term Insurance

Basically, the short-term option provides consumers with the opportunity to cover any financial risks to their material possessions. These are things such as your vehicle, your property, and the things you own inside your house or even yourself. It’s an agreement between the insurance company and the policy holder.

So, in the event of your possessions becoming damaged or stolen, your insurer will be there to make sure that you can get those possessions back. In return for this safety-net, so to speak, you pay a certain amount of money to the insurer every month. These are called premiums. The amount that you end up paying is worked out according to your individual risk profile. In turn, your risk profile is determined by a number of factors.

For example, in the case of your vehicle insurance these factors, amongst others, would include:

  • Your age;
  • Gender;
  • The value of the car;
  • Your driving record;
  • Where the car is parked;
  • The security systems protecting that car;

The greater your risk profile, the higher your premium will be. Therefore, it's also important to choose the right policy, in order to ensure that you have an adequate amount of coverage to suit your needs.

Insurance Terminology Explained

What is the difference between retail value and market value?

Retail value is the price that you would pay for your vehicle if you were to buy it from a dealer or showroom floor. This value includes any markup that the dealer earns on the sale. If you were to ever experience a total write-off or theft of your vehicle, then retail value will offer you the best payout from the insurer.

Market value is the average price in the market for your vehicle. Many factors are taken into consideration to determine the market value of a car, such as year model, make, mileage, and service history to name but a few.

What is an excess?

An excess, or deductible, is the amount that you will be required to pay towards a claim you make on your policy. This amount will be deducted from the total amount paid out from the insurer following a claim. In some cases, increasing the excess can reduce your premium for that specific cover, but take care that you have enough savings stashed away to cover the increased excess if you ever need to submit a claim.

We are here to help you fully understand your insurance policies and cover to ensure you are fully equipped and protected, feel free to contact us if you have any questions or if you need any clarity on your policy documentation.