Don’t get caught penny pinching on your car insurance

Your car is a depreciating asset, losing value the moment you drive it out of the dealership. 

But in it you have invested a large sum of money and a costly repair could be a nasty shock to your bank balance.

For this reason, the following 6 tips are set to guide you on the road to insuring your vehicle.

1. Don’t assume that your policy covers everything:

Check your motor insurance policy for any covers which may not form part of your standard wording such as dent cover, tyre cover, hail damage and so on. 

2. Get credit shortfall insurance:

An often overlooked risk is that of a credit shortfall on a financed new vehicle.

This typically arises when a vehicle is written off in the first two years of signing a finance agreement to purchase a car.

Accrued interest on the loan within the first two years may very well mean that your insured value of your vehicle could be less than your outstanding debt to the bank.

If you don’t have credit shortfall cover to settle this amount, you will be liable for the shortfall between what’s owed to the bank, and your insurance settlement which does not cover you for the interest. 

3. Always insure for the retail value of the car:

Ideally, you want to be in a situation where your insurance can replace ‘like for like’ and avoid being forced to compromise on the quality of your vehicle if this is not the case.

Essentially, retail value is the price at which the dealer will sell a second-hand vehicle to you.

Market value is the average of the difference in price between retail value and its trade-in value, in other words what you could expect to receive from a dealer, were you to trade the vehicle in. 

4. Beware of low premium-high excess insurance covers:

If you claim on your vehicle insurance, you may have to pay what is called an insurance deductible or excess – the first portion of the claim that you are responsible for.

Depending on how your policy is structured, this amount can vary.

The most common is 5% of the insured value – and on a R300 000 vehicle value for example, that equates to an excess of R15 000.

Be very wary of taking the lowest premium as the bite is often in the high excess structure – in some instances this can be as much as 25% of the insured value or R27 500, whichever is the greater – very few people have that kind of spare cash around to cover their excess payment.

Taking excess waiver cover could also be an alternative option to consider.

5. Insuring a student vehicle:

Insuring a vehicle for a young or inexperienced driver who recently obtained their drivers licence will typically cost more in premiums due to the higher risk that an inexperienced driver presents.

It’s a good idea to consider additional personal liability top-up cover if you are insuring your child’s vehicle – given the risk of a major claim in the event of an accident or incident where a young driver is proven to be negligent or reckless.

Also specify that your child is the regular driver.

6. Maintain your vehicle in good working order:

Wear and tear and other maintenance related losses are one of the key reasons for a claim being rejected or the settlement being less than expected.

Remember that insurance is there to cover sudden unforeseen circumstances which result in loss and/or damage and does not cover damage as a result of negligence or wear and tear.

If you crash into a vehicle because of smooth tyres, there is a good chance that your claim could be repudiated as your vehicle is deemed unroadworthy.

For more information, visit www.aon.co.za.