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THOKOZANI MTSHALI ASKS:
I’m driving a 2011 Toyota Auris that was insured until last year, when I had financial difficulties.
I want to insure my vehicle again, but the challenge is that I get quoted expensive premiums that are way above what I was paying last year, even though the value of the car has dropped.
Which option can I choose to insure a fully paid-up vehicle at a reasonable cost?
TYRONE LOWTHER, HEAD OF BUDGET INSURANCE AND KUBASHAN NAICKER,BUDGET INSURANCE MANAGER:
It’s good to hear that insurance is again on your radar. Insurance is no longer a luxury, but a necessity that no one can afford to be without.
It happens all too often that only days after cancelling insurance your car gets stolen or is involved in an accident, leaving you with tens or even hundreds of thousands of rands to fork out from your own pocket or having to borrow money, which drives you further into debt.
The main reason you are paying more for your insurance now than you did last year, despite your car depreciating in value, is because of repair inflation.
Many people assume that the biggest risk to their car is theft or a complete write-off in an accident, and that the actual value of their car is the major factor of the insurance premium price. This is not the case.
A relatively low percentage of accident-damaged cars are written off and, in fact, most cars involved in accidents are repaired and placed back on the road.
The cost associated with repairing a car, which entails replacing vehicle parts, plays a far more significant role in determining premium price and most of the insurance premium goes towards covering the car against accident damage.
Fixing accident-damaged cars is a costly affair. This cost will be substantially more this year than the same time last year owing to our currency depreciation, for example, even though that car may have depreciated in value.
So while the market value of your car may be lower, because the premium is providing cover against damage to the car more than anything else, premiums must increase in line with repair inflation to cover the risk.
That said, there are several ways you can reduce your car insurance premium. We have the following tips:
. CHANGE YOUR EXCESS: Increasing your basic excess can lower your monthly insurance premium.
. SKIP THE BENEFITS: Removing additional benefits such as car hire also lowers your monthly insurance premium.
. SHOP AROUND: Find an insurer that can offer you the best level of cover at the most competitive price. Look at other factors such as the level of cover and client service.
. MAKE YOUR CAR SAFER: Installing a tracking device may qualify you for a discount on your premium.
. KEEP YOUR CLAIMS RECORD CLEAN: When you make a claim, your premium will likely go up. So don’t claim for small incidents that you could possibly pay for out of your own pocket.
Insurance is often one of the first costs to be cut when budgets are tight and while that may provide temporary relief, it can have massive financial implications.
To help consumers weather this economic storm, Budget Insurance launched Budget Lite, which provides three levels of non-comprehensive cover for paid-off cars worth up to R100 000.
Budget Lite is a smart way of staying insured without paying too much.
. Budget Lite 1: Third-party cover (up to R1 million) and theft cover.
. Budget Lite 2: Third-party cover (up to R1 million), theft cover, cover if your car is written off and hail cover. You also benefit from Accident Assist.
. Budget Lite 3: Third-party cover (up to R1 million), theft cover, cover if your car is written off,hail cover and limited accident cover of up to R15 000. You also benefit from Accident Assist.
