Short-term Insurance vs Long-term Insurance

Model home and cars showcasing the different types of insurance for your home and car.

Learn what the definitions of short-term insurance and long-term insurance are, and what the differences are in terms of which products they each cover and how they're governed.


What is short-term insurance?


Short-term insurance, generally speaking, covers your possessions. It refers to car insurance, home insurance, cellphone insurance, travel insurance, and so on. Think of it this way: what are the conditions in your life that can change over the next five years? You may buy a new house, new TV or new car. If you do, your insurance on those items will have to change too. Oh, and let's not forget, you're definitely going to be older in five years' time too!


Short-term insurance, as the name suggests, is cover that you'll only have for a set amount of time.


The Short-term Insurance Act of 1998 provides a full and technical list of what qualifies as short-term insurance: 'an engineering policy, guarantee policy, liability policy, miscellaneous policy, motor policy, accident and health policy, property policy or transportation policy, or a contract comprising a combination of any of those policies'.


Your short-term insurance cover as well as your monthly premiums are influenced by circumstances such as your age and gender. These factors contribute to your overall risk profile. Let's use car insurance as an example. Your risk profile would be calculated according to: age, gender, driving record, value of the car, what security systems you have installed, and where it's parked during the day and night.


Short-term insurance is regulated by the Short-term Insurance Act of 1998, and disputes that arise out of such policies are adjudicated by the Ombudsman for Short-term Insurance.


Short-term insurance on


Making a bit more sense? Then have a look at the different types of short-term insurance products from some of South Africa's best short-term insurance companies that you can compare on



Car insurance
Motorcycle insurance



Medical aid (including hospital plans)
Medical insurance
Medical gap cover



Home insurance
Building insurance
Cellphone insurance



Car, home, building insurance



Business insurance
Car & commercial property insurance
Business legal cover
Professional liability cover



Travel insurance
Legal assistance
Pet medical aid


What is long-term insurance?


Simply put, long-term insurance is about big, life-changing events: retirement, disability and death. You pay a monthly premium to an insurer, and then the insurer pays out a lump sum if or when the event you insured against happens.


Examples of long-term insurance include life insurance, disability cover and funeral policies. Unlike short-term insurance, you may expect the premiums of long-term insurance to remain fairly stable over the period of the policy, though some life policy premiums increase as you get older. How your premiums can stay stable over such a long time (as the span of a human life) can be attributed to the magic of actuarial science, which can make fairly accurate assessments about your life from the data. Actuarial models can even predict when you might pass away!


Long-term insurance is regulated by the Long-term Insurance Act of 1998, and the Ombudsman for Long-term Insurance adjudicates all complaints or disputes with regard to life and disability cover, and funeral policies.


Looking for long-term insurance products? Compare them on


Life insurance

Life insurance
Funeral insurance


So what is the difference between short-term insurance and long-term insurance?


As we've mentioned, one of the first key differences between long-term insurance and short-term insurance is how risk and pricing are calculated. When you take out long-term insurance (such as life insurance or funeral cover), you will have to disclose facts that are of a material nature on the day that you sign the contract, and changes in personal or health circumstances that come later which will not be factored in.


With short-term insurance, however, it is of the utmost importance that you ensure you keep your insurer informed about any relevant changes, for example if you move house or change your jobs. Make sure you read your short-term insurance contracts carefully so that you're well informed about what is required from you. That way, you won't have problems with your claim down the line.


This article is for informational purposes only and should not be construed as financial, legal or medical advice.

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