Comprehensive insurance is a must for financed vehicles, cautions WesBank
Insurance is often compared to an umbrella – you hope you won’t need it, but when you do, you are glad you have it. This applies to all types of insurance, including motor vehicle insurance.
However, some car owners who have not lodged a claim in a long time believe they don’t need car insurance, and choose to cancel their policy as a result. “That is a very unwise thing to do,” warns Lebo Gaoaketse, Head of Marketing and Communication at WesBank.
According to the South African National Roads Agency (SANRAL), there are over 800 000 motor vehicle crashes in South Africa every year, while a recent report by Tracker showed a marked increase in vehicle crimes, including hijacking and vehicle theft. Yet, according to the Automobile Association of South Africa (AA), between 65 percent and 70 percent of the estimated 12-million vehicles in the country are uninsured.
“Looking at these statistics,” says Gaoaketse, “one understands why it’s compulsory for car buyers to take out comprehensive insurance on any financed vehicle before they can take delivery of the car.”
As the name suggests, comprehensive insurance is an insurance option that covers the car against damage from collisions, fire, theft, third-party claims and other insured events. “According to the National Credit Act (NCA), a credit provider may, during the life of the credit agreement, require a customer to maintain insurance covering the loss or damage of the financed property. This affords the customer the peace of mind of knowing that the debt would be settled if the financed car is damaged or lost,” explains Gaoaketse.
There is a worrying trend, though, where car buyers cancel their car insurance soon after taking delivery of their vehicle from the dealership.
“This is very risky because in the unfortunate event that the car is involved in a crash, the person who has entered into the finance contract will be required to pay for the repairs required on the vehicle, as well as any third-party claims if there were other people involved.
“This is worse if the vehicle is damaged beyond repair or if the car gets stolen. The buyer remains liable for the settlement of their vehicle loan, and ends up paying for a vehicle they no longer have,” says Gaoaketse.
When people fall on tough economic times, it might be tempting to cancel things like insurance that might seem like an unnecessary expense. Instead of cancelling, it is best to review one’s policy to check if the premium can be adjusted downward.
“Insurers can review the insurance policy if a customer has remained claim-free for an extended period, or if their usage pattern changes, perhaps as a result of their company adopting a remote working policy. This might result in a saving that makes the cover more affordable,” advises Gaoaketse.
“However, when discussing your risk profile, be completely truthful with your insurer because false information might compromise your cover when you submit a claim. Furthermore, read your policy schedule carefully to understand what is covered in your policy and what is excluded,” he concludes.
