When times are tough, we automatically try to reduce monthly expenses. Too often, instead of cutting out luxury items, like restaurant meals or holidays, consumers cancel necessities like insurance policies. This may seem like a good idea to cut costs but could have implications in the future.
“No matter how tough times are it’s vital you don’t cancel your short-term insurance, particularly your motor vehicle cover,” says Johan van Greuning, Head of Standard Insurance Limited. Considering the fact that 65% of road users in South Africa are not insured, the risks are high and therefore it’s important that your assets are covered.”
Should you crash into another car, you are liable for the cost of fixing or replacing that car if you do not have third party insurance. This could cost you anything upwards of R100 000. The car owner’s insurance will pay for the car to be replaced or fixed, but that insurer will then claim the full amount back from you - adding financial strain.
Alternatively, you could be involved in an accident with an uninsured driver. If you are not insured, it is often extremely difficult to recover the money to pay for repairs or replacements. If you were insured, your insurance company would take on the fight on your behalf.
There are basically three main kinds of vehicle insurance:
If you bought your vehicle and entered into an agreement with a finance house, the agreement is subject to the vehicle being comprehensively insured for the duration of the agreement. You cannot cancel your insurance as this means you default on the agreement.
If your car is paid up, you can be more flexible. If you find yourself in financial difficulty, instead of cancelling your policy talk to your accredited financial advisor about the alternatives. Rather than leaving yourself totally uninsured, it may help to downgrade your policy, for example from comprehensive to third party only cover.
Work out how essential your car is to you,” suggests Mr van Greuning. “Can you manage without it? Are you financially fit to buy a new car if you are not insured? Cars are of paramount importance for most of us because of South Africa’s limited public transport systems. It does however depend on your individual circumstances and you should discuss this with your financial advisor.”
“If you find yourself struggling to make payments, have a look at your lifestyle and spending habits. Cut back on unnecessary expenses and seek assistance to help you budget more effectively.
“Insurance, bond and vehicle repayments should be non-negotiable expenses as part of your monthly budget,” says Mr van Greuning. “Don’t be tempted to cancel your insurance when budgets are stretched.”