For many buyers the excitement associated with buying a new car can make them forget about the financial realities associated with vehicle ownership. Along with monthly finance instalments, the costs of insurance, fuel and maintenance also need to be included in the car-buying budget. However, sometimes consumers take the risk of canceling their comprehensive insurance and drive around without any financial cover – with potentially disastrous consequences.
“For some buyers it is simply an affordability issue,” says Rudolf Mahoney, Head of Brand and Communications at WesBank. “With fluctuating fuel prices, interest rates and other living costs, people are trying to keep their budgets in line. Many consider cancelling their comprehensive insurance to afford other expenses.”
Recent economic data shows that household debt levels, while declining, are still high. On average around 75% or more of household income is used to service debt. In the same vein, the most recent statistics from the South African Insurance Association (SAIA) indicates that only about 35% of vehicles on local roads are insured.
This contrasts starkly in comparison to international markets where insurance is lawfully requirement. In Norway, Indonesia, the UK and USA, for instance, all road-going vehicles are legally required to have comprehensive insurance. Many other countries insist on a minimum of third-party insurance, to ensure that other road users are not exposed to financial risk should an accident occur.
In the absence of such legislation in South Africa, consumers are urged to carefully consider the impact of having no comprehensive insurance policy in place for their cars – whether financed or paid-up. WesBank assists with this process, contacting customers on an annual basis by obtaining their comprehensive insurance details.
The risks of not having comprehensive insurance can be very costly should a driver get involved in an accident. Instead of cancelling comprehensive insurance policies, consumers can use the following tips from WesBank to assist in making their insurance premiums more affordable:
- Check the market value of your car against the amount you are insured for – an annual call to your insurer can help adjust your premium in line with the market value of the car to account for depreciation.
- Opt for a higher excess amount – this reduces your monthly premium, but remember that if you have an accident the pay-in amount for repairing your car will be very high and costly.
- Install a tracking device in your car – this helps to lower your insurance because you have added another layer of security to your vehicle. Once you have a tracking device installed inform your insurer and request a revised quote.
- Go for a certified, advanced driving course – these courses make you a safer driver and your insurance provider is likely to view you as a lower accident risk.
- Don’t claim too often – If you have a high claim history, this will result in higher premiums. Claiming for minor damages, such as stone chips or parking lot dings, will drive up your premiums.
- Tighten your vehicle security – keeping your car in a locked garage, or guarded basement, will keep it more secure. Insurance companies view this as a low risk when it comes to vehicle theft.
- Always update your personal details – not only is this a requirement to maintain a valid insurance policy, but if you’ve moved to a safer neighbourhood with 24-hour security facilities it will assist in dropping your insurance premiums.
- High performance cars will attract higher premiums – naturally, faster vehicles are seen as being driven by more enthusiastic drivers, who carry an increased accident risk. Keep this in mind the next time you’re considering an upgrade.
- Driving experience counts – drivers who are younger and have less driving experience will be charged higher insurance fees. The key here is to build your driving experience while driving a vehicle that you can comfortably afford – as well as keeping it insured.
- Combine your car and household insurance – a joint policy that covers both your household goods and car can result in a more attractive and affordable monthly premium for your comprehensive insurance policy.
- Maintain an uninterrupted insurance history – cancelling your insurance will introduce gaps into your coverage history. A more complete picture of your insured history and claims can lead to a lower premium.
- Compare comprehensive insurance quotes – it is always a good idea to shop around and compare insurance quotes to find the most affordable comprehensive insurance for your budget. If you think you are paying too much phone around for a few quotes and ask your current insurer if they can match or beat the offers you receive.
Monthly insurance premiums are one of the most important motoring costs for any car buyer. Any consumer who has vehicle finance has a contractual obligation to be comprehensively insured for the full duration of their finance agreement.
“When motoring expenses become difficult to afford, consumers should rather look at cutting out other unnecessary expenses to ensure they can maintain comprehensive cover,” says Rudolf Mahoney. “Should they find themselves without car insurance when disaster strikes, the repairs alone could lead to financial ruin.”
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