By: Ernest North
December holidays and back-to-school expenses can put a massive dent in your finances. If you’re looking for ways to save money as the new year starts, it might be a good time to review your car insurance.
Always stay covered
Many people are tempted to cancel insurance at the start of the year when their budgets come under pressure. That’s especially the case if they don’t expect to be driving much in the foreseeable future. But insurers will regard you as a higher risk client and charge you higher premiums if you have interruptions in your history of insurance coverage.
If you have regular breaks in your cover, your insurer may suspect your policies were cancelled due to unpaid premiums or that you haven’t driven for a long time. Lapses in cover might also suggest you only get insurance when you believe you face higher risks, for example, when going on a road trip. Continuous cover also gives the insurer a clearer picture of your risk over a longer, ongoing period. It’s thus wise to maintain car insurance to get the most attractive premiums.
Think about third-party only cover
If you believe it’s not worth insuring your older vehicle, you should still consider third-party liability cover, which is the most basic and affordable car insurance you can buy. From as little as R50 a month, it offers protection for everything that your car could damage while you are driving it, except for any damage caused to your own car. Third-party liability will cover the costs when the third party lays a damage claim against you. That could save you a lot of stress and money if you have a crash with an expensive sports car or luxury SUV.
Take tangible steps to reduce risk and inform your insurer about them
While many risks are outside your control, there are ways that you can reduce the risks of being in an accident or your car getting stolen. For example, you can ensure that your car is always parked behind a locked gate overnight, or install a tracking device to increase the chances of recovery if it gets stolen. Check your policy or speak to your insurer to find out about the possible savings before you take any of these steps.
Adjust your excess
An insurance excess is the amount of money you contribute towards a claim. You can consider increasing your excess if you want to reduce your monthly premium. Conversely, you can decrease your excess and increase your premium if you are worried about out-of-pocket costs if you have an accident. Try to get a good balance between what you can afford to pay at the drop of a hat and what you can afford to pay monthly in premiums.
TIP: Read the small print about excesses
Excesses across different insurance providers don’t work in the same way. This makes it difficult to directly compare insurance quotes. Some providers offer a flat excess. This means you’ll pay the same amount, no matter whether the damage costs R100 000 or R10 000 to fix. A few providers have percentage-based excesses, where you will pay a certain percentage of your claim with a minimum excess.
Most conventional insurers also apply additional excesses. For example, you might need to pay an additional excess if the accident happened after 10pm, the driver is younger than 25 or your policy is less than a couple of months old. Some insurers charge zero excesses for claims such as hail damage or windscreen replacement.
This is why you need to carefully compare the excess terms and conditions to understand exactly what you are getting for your premium.
Get quotes from competitive providers
The start of a new year or your insurance provider’s annual premium increase are good moments to get quotes from competing providers to make sure you’re getting a fair deal. Shop around before accepting a provider’s initial premium or their annual increase. Make sure to compare apples with apples when getting quotes and read the fine print to check that you’re getting the cover you actually need.
Avoid claiming for small dents and scratches
If you claim often, your premium might be reviewed and increased. If there’s a no-claims bonus on your policy, you’ll also lose it when you claim. It’s worth getting a quote for a repair after a minor ding to evaluate the cost. If the cost is comparable to or less than your excess, consider paying out-of-pocket to maintain a clean insurance record and stable premiums.
Think about becoming a one-car household
Depending on where you live and your lifestyle, your household might not need a second car in the garage. If one of you works from home or can travel to work by Gautrain or MyCiTi bus, it could be viable to sell one vehicle. If you don’t do school runs or commutes, public transport or e-hailing can be cheaper than owning a car.
Consider going digital
In this day and age, when everything else is digital, insurance should be, too. Digital insurance platforms make it easy for you to get a quote online, play around with different excesses to see how they affect your premiums and buy a policy within minutes. Because they’re efficient and automated, digital insurance providers can often offer lower premiums. Plus, you’re in complete control of your experience. You can cancel or change your policy on a website or app – with no need for long calls to contact centre agents.
* North is the co-founder of digital insurance platform, Naked.
PERSONAL FINANCE