The highs and lows of cheaper car insurance premiums

With the rising costs of living that are made worse by petrol hikes, you might be looking for ways to lower your insurance premium. Before you change your policy or opt for a cheaper insurance premium it is important to know what the implications are and what you are covered for.

Pricing

When choosing an insurance option take care to compare apples with apples. Too often, consumers choose a cheaper premium not fully aware what it means for them or not understanding what a reduced cover implies. Here are five questions you should ask yourself when comparing different insurance options:

  1. Is your car insured for market or retail value?

    The retail value is the average price a dealer would sell the vehicle taking its age, condition and mileage into account. This means if your car is covered for its retail value and it written off or stolen without being recovered, the settlement amount will be based on its value (less the applicable excess).
    The market value is lower than the retail value. A discounted premium is charged for clients selecting the market value.

  2. How much would your excess be?

    Double check how much your excess will be in the event that you have to claim. Often a lower premium means a higher excess. Depending on your policy you may have a flat excess or a percentage based excess.
    flat excess is a predetermined fixed amount that you will have to pay once your claim has been approved.
    percentage based excess is worked out by paying a certain percentage of the amount that your vehicle is insured for.
    Scenario 1: If for example the excess on your car is R3,000.00, and the damages amount to R50,000.00, your insurer will pay the remaining R47,000.00 once you’ve paid your excess.
    Scenario 2: If your car is valued at R150 000, and your excess is 10% of the insured value of the vehicle. Then your excess will be R15 000.
    Read through your policy and see if there are any additional excesses that you might also have to pay. For example, will an extra excess be added if the driver at the time of the incident is not the regular driver or younger than 25?
    Remember: In the case of accidental damage, you have to pay the excess once the claim has been approved before any repair work can begin.

  3. Is the cover you are being quoted on comprehensive or only for limited liability such as theft or third party?

    Comprehensive car insurance usually provides the widest cover and covers for theft and hijacking, damages due to an accident, fire or explosion and natural disasters like hail and floods.
    Third Party Fire and Theft insurance provides insurance cover for any damage you may cause to the vehicle of another person. You will also be compensated for the loss of your vehicle due to attempted theft, theft or hijacking, as well as any damage to your vehicle that was caused by fire, lightning or explosions. The main difference between ‘Comprehensive’ and ‘Third Party Fire and Theft’ is that your car is not covered against accidental damage.
    Third Party Only insurance is the cheapest car insurance and provides cover for any damage you may cause to the vehicle of another person. You have no cover under this insurance type against the loss of, or damage to your own vehicle.

  4. Does the policy require a tracking device?

    A tracking device could mean an additional monthly expense. On the other hand, depending on the make and model of your vehicle, some insurance companies may require that you have a tracking device installed in your car. This may result in a reduced premium because a tracking device increases the chances of recovering a vehicle in the unfortunate event of it been stolen, thereby reducing the risk.

  5. Does the policy include any additional free services such as an emergency service?

    This could be any added value services such as roadside assistance or assisted driving to avoid drinking and driving.

Whatever option you end up choosing, it is important to know what your needs are, for example: “In the event that I have to claim and I don’t have access to my car, would I need the car hire option?”

Remember: It is always vital to ask your insurer to explain any unclear conditions of cover and how this will impact your premium and the cover you will receive. Quite often a moderately more expensive premium could mean significantly better cover.

 

Article credit: https://www.miway.co.za/blog/useful-info/the-highs-and-lows-of-a-cheaper-car-insurance-premium