Car Insurance – cheaper isn’t always better

Because every person’s situation is unique, we can only provide general information in this article. It does not constitute or should not replace the advice of a broker that deals with car insurance.

Jack was feeling mighty pleased with himself. He had just bought himself a brand new SUV. He was ready to hit the road – with inter-provincial tourism being a possibility again, the Kruger National Park was calling. He only had to make one last stop for a few groceries. When he returned to his car the car guard pointedly avoided his gaze. In fact, he crossed the road. As he rounded the rear of the car to put his groceries in the boot, he dropped the eggs…

What Jack did not know …

Jack thought he deserved a prize for being simultaneously super responsible and clever when he insured his baby. He felt he had done his homework by making sure he gets the cheapest insurance on the internet for his car. What he did not realise was that there was fine print lurking in the, well, fine print!

What he did not know was that he would pay more for the damage to his car than he would have if he had agreed to a slightly higher premium. His insurer did not process ‘No Fault’ claims. If he chose to claim none the less, he would lose his ‘No Claim Bonus’, he would pay a higher excess, his premium would go up and any dreams of a cashback after three years would be crushed.

Lucky for Jack …

This accident made Jack realise that he needs to understand his policy better. He knew that new cars lose value, the minute they are driven out of the showroom. He knew that the car belonged to the bank until he paid off the premiums. What he did not think of was that if a herd of elephants trampled his car in the Kruger, he would still have to pay the bank the balance of what he borrowed.

But isn’t that the point of insurance? Not quite. The ‘book value’ on which his premium is based is considerably less than the amount of money he owes the bank. He did not know that he needed to make provision for the difference. Maybe he’ll avoid elephants for a while.

So shiny …

Remember, Jack and Jill’s situations are not the same. The purpose of marketing material is to entice you to buy products. Each company will present their products in such a way that it highlights the advantages of their products. However, there are always trade-offs and these are not always made explicit. It is a balancing act. In order to provide you with certain benefits, others have to be cut, limited or made available as expensive add-ons. It is a matter of which sacrifices are more acceptable to you. It is hard to think of all the variables when you are not faced with them! An independent broker can help.

The compulsory bits …

  1. All new cars must be micro-dotted
  2. Your car needs an alarm
  3. Your car license needs to be up-to-date
  4. Your driver’s license needs to be up-to-date when you drive

Premium influencers

Your car’s pedigree

  1. Have you paid off your car?
  2. How old is your car?
  3. What is the make of your car? (Some cars are much easier to steal, or may be more of a priority for thieves!)
  4. What is the colour of your car? (Some colours are more difficult to see at dusk or cloaked in mist.)

Work or leisure

  1. What do you use your car for? ( driving to and from work only counts as private use but if you visit clients that is considered business use)
  2. What kind of cover do you want?
    • balance of 3rd party fire and theft
    • comprehensive cover (this covers both your car and the other car)
  3. How often do you drive your car?

Where you and your car live

  1. Where do you park your car at night? Does it sleep on the road, behind a gate, in a garage, or in a security complex? Take note: some companies will double your excess if an accident happens between midnight and 4 am.
  1. Where is your car parked at work? Does it wait patiently on the road, in a parking lot or in a garage with security?

You and your co-driver(s)

  1. How old are you and what is your gender? Being under 25 and full of testosterone is often not viewed as the safest combination by anyone that is not under 25 and full of testosterone.
  1. Who else will be allowed to drive the car? Some companies will increase the excess you need to pay if there are more than one driver. Others won’t pay if the driver was not nominated at the start of the policy.

Additional things that may reduce your premiums

  1. Add things that makes it harder to steal your car – fit a tracking or additional (industry approved) locking device.
  2. Some companies offer a discount if you combine your household and car insurance.
  3. Agree not to accept cash back.
  4. Remove some benefits. You may not need a hired car whilst yours is being repaired. If you have a new car and you put in a claim for this benefit, you should be issued with a substitute model that is one year ‘younger’ than your current car. You may choose to waive roadside assistance.
  5. Accept a larger excess – this means that your premium might be lower, but you will have to pay in a larger amount, should your car need repairs.

Don’t be like Jack!

Be careful out there and for the times you aren’t or can’t, make sure you are appropriately covered!

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