Vehicle insurance should be seen as a necessity to protect motorists from becoming indebted in the event of an accident where they may be liable for damages, according to an expert.
Speaking to Fin24 by phone on Friday, Colin Mchunu, senior manager at Alexander Forbes Insurance, highlighted the importance of vehicle insurance – normally one of the first things to be dropped from budgets when times get tough for consumers.
Before getting insurance you need to consider your financial standing and your budget, Mchunu explained. “People usually cancel insurance if they realise they cannot afford it after taking it.”
However, this could end up being a costly mistake. Mchunu explained that motorists who end up in a car accident could become heavily indebted if they have to pay for the damage.
The Automobile Association (AA) also in a statement stressed that insurance should be considered a necessity and not a luxury.
After recognising the need for insurance, there are a few things to consider when choosing an insurer.
“Insurance is a necessity but it is more important when taking out insurance that motorists understand exactly what they are getting, and how much it will cost them if they do claim,” the AA said.
Sometimes motorists who have insurance choose offerings based on lower premiums, which is not necessarily the best option in terms of benefits.
“It is necessary for motorists to read their policies carefully, and to understand all the aspects of the insurance they are planning on taking. Too often low premiums sound good but fall short when claims are made,” the AA said.
Motorists need to be aware of an excess fee, payable when a claim is made regardless of who is to blame, the AA explained. Some insurance companies may offer low monthly premiums but may require a “substantial excess” for the claim.
“When this happens, some people are shocked when the costs of repair to a vehicle may be carried entirely, or in part, through the excess fee, with little or no money being paid by the insurer.
“Lower monthly premiums in this case will not count for much as the motorist still has to pay a big portion of the costs out of their own pocket,” the AA explained.
How to get lower premiums
But there are steps you can take to reduce your premium.
Mchunu explained that insurers also set premiums based on the age of the driver.
“Those who are younger have higher premiums. So you may want to consider putting the vehicle on your parents’ insurance. They will often have a cheaper premium as parents often have a better (risk) profile.”
Secondly, Mchunu said that you should consider taking a comprehensive insurance policy as opposed to a single policy for your vehicle. A comprehensive policy covers not only your vehicle, but your house and household goods.
Premiums are often lower, and if anything should happen to the vehicle, the insurer can still collect premiums for the other assets.
It is important to consider where the vehicle is based. Secure areas often result in lower premiums charged. “If security is not adequate, then it is a problem. The insurer will charge a higher premium.”
Other security measures like a car tracking device also help lower premiums. If a car is recovered but is a wreck, the insurer can still sell the wreck and collect some revenue from the sale, he explained.
Motorists should also be alert to the fact that they could be offered a discount from their insurer if they have not claimed for at least three years, said Momentum’s Matshidiso Rafube, manager of national franchise development for short-term insurance.
“If you’ve completed a Professional Driving Permit, you may also be eligible for a discount on your premiums,” she said.
Rafube also advised that motorists search for an insurer that will provide an excess waiver. But that also means premiums may be higher.
“Understanding excesses is the most important thing that you can do to ensure that there are no surprises at claim stage.”
Before signing off on a policy, the AA encourages motorists to consider these 10 things:
1. What is the excess? Is there a different excess for loss and for damage?
2. Is the excess a flat rate, or is it calculated as a percentage of the loss or damage?
3. Besides the initial excess fee, are there any additional excess fees payable when claiming?
4. Are there any penalties for claiming within the first six months, or in the first year?
5. What is the turnaround time for claims?
6. Will you be covered if other people drive your car? If you are covered, find out of there is a difference in the coverage depending on the age of the driver.
7. Is the car covered for resale or full retail value?
8. Is the insurance comprehensive insurance?
9. Are there any limitations on where or when you can drive your car?
10. If something happens to the car, is car hire included while the vehicle is being repaired or replaced?
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