Economic uncertainty remains a key challenge for South Africans, with the prospect of higher electricity prices, and rising fuel costs affecting consumers’ disposable income. This economic pressure means more people are tightening their belts and looking for ways to save money. However, choosing the cheapest insurance option may not turn out to be the wisest decision in the event you have to claim.
Momentum Short-term Insurance (MSTI) Head of Operations, Vickey Swanevelder, says there are several important factors consumers should consider before buying insurance. “While it is understandable that price is a major consideration, this should not be the only factor influencing your buying decision. There are other important factors to take into account to ensure you are adequately covered.”
Buying peace of mind
“When buying car insurance, you are ultimately buying peace of mind. You need the assurance that if you have to claim, the insurer will be able to honour your claim. Buying cheaper car insurance could also mean you have limited services available. That’s why it is important to look beyond price and consider the services and benefits available to you: is 24/7 roadside or home emergency assistance available, is the excess fixed or a percentage of the cost of the claim.”
Swanevelder shares other critical factors to consider when insuring your car:
Comprehensive versus limited cover
The type of cover you choose is dependent on your needs. Are you on the road every day or is the car parked in a garage and only used on weekends?
Swanevelder also notes there is often a battle between price and cover for consumers. “You may want to choose cover that is only limited to fire, theft and third party as it might be cheaper. However, if you crash into your neighbour’s wall, it is only the damage to the property that will be covered and not the impact of damages to your car. Having limited cover is still better than having no insurance at all.
With comprehensive cover, you can also be covered for damages to your own car.
Calculating client risk profiles
Consumers are becoming more insurance savvy but there are some areas they tend to overlook, such as the information that is critical for calculating a premium.
Swanevelder explains premiums are calculated based on a client’s individual risk profile. “Insurers take into account the value of your car, the need for private or business use, regular driver of the car, claims history and security devices among other factors. This is why you need to be completely honest with the insurer when taking out an insurance policy. If you do not disclose all the facts, the selective information you provide may negatively affect your claim.”
It is also important to update the insurer when circumstances change. “For example, if you change your home address or the regular driver of the car, the insurer needs to be informed,” explains Swanevelder.
Different types of excesses
Some car insurance companies offer a fixed excess, which remains unchanged even if you claim, while others offer excess as a percentage of the value of your claim. “For example, if a car valued at R300 000 is written-off, some insurers can charge an excess of 5% of the car’s value, meaning you pay R15 000 before your insurer can settle your claim.
Choosing a reputable insurer
Whether you want comprehensive or limited cover, choosing a car insurer with a solid track record is important. It is advisable to do research and sign-up with an insurer which has a solid track record when it comes to settling claims. Educating yourself is the first step you can take towards making the best decision for your financial goals,” concludes Swanevelder.