Differences between long-term and short-term insurance

Investing during a recession
June 11, 2019
From Duncan’s desk
June 21, 2019

Today, insurance is an important part of our lives, as it will lessen the costs of having to repair or replace our belongings due to unforeseen circumstances such as burglary or a car accident. When choosing your insurance policy, it is important to note that there are numerous differences between short-term insurance and long-term insurance, and each type comes with its own set of rules, regulations and benefits.

The key difference between short-term insurance and long-term insurance is simply how long the insurance contract will last.

There are more key differences between short-term insurance and long-term insurance:

Long-term insurance (e.g. life insurance and funeral cover): 

When it comes to applying for life insurance and funeral cover, it is important to note that full disclosure is completely non-negotiable. Financial advisors or insurance brokers must be contacted by policyholders to conduct a thorough policy review, because an individual’s needs and lifestyle constantly undergo changes.

Short-term insurance (e.g. car, house and household contents insurance): 

A key difference between short-term insurance and long-term insurance is that the short-term insurance industry has a different pricing structure and disclosure rules. When clients take out life insurance and funeral cover (long-term insurance), they are required to disclose items of a material nature on the day that the contract is drawn, regardless of any changes to their personal or health circumstances thereafter. However, clients who take out car insurance or house insurance (short- term insurance), must inform their providers of any changes. For example, if a client takes out car insurance, they will need to inform their providers of changes such as the location where the car is parked, as well as what the vehicle is used for. A short-term insurer will assess all the relevant conditions before accepting or rejecting the claim.

We advise all our clients to regularly assess their insurance products and inform us of any and every material change. Contact Stepp today for all your short-term and long-term insurance needs!

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE)