Insurance is often seen as a ‘grudge purchase’ – in other words, something you don’t really want to spend money on, but something very important to have. You don’t appreciate it until life happens and you need it – and then only do you get to appreciate having it in the first place.
Insuring your car doesn’t have to cost a fortune. It’s a good idea to learn more about how insurance works so that you can make informed decisions about what to choose when you insure your vehicle and ways to minimise this cost.
There are a number of factors that influence an insurance premium, and there are questions you should ask your insurer to help reduce the cost. There are also tips we can share with you.
How car insurance premiums are calculated
According to Christiaan Steyn, head of MiWay Blink, some people believe that vehicle insurance is beyond their financial reach even though there are affordable solutions that can protect their vehicles and pockets.
The following considerations are used by insurers to determine your vehicle insurance premium:
● What is your car worth? The type of vehicle you buy has a huge influence on your insurance premium. For example, the average value and subsequent repair cost of a luxury SUV far surpasses that of an entry level hatchback and the car insurance premium will reflect that.
● Excess: Excess is the amount you agree to pay yourself during a claim. It is the portion of the risk you are “self-insuring”. The higher the excess you agree to, the lower your monthly insurance premium will be. Click here to learn more about “excess”.
● What are the best cover options available? Depending on your circumstances, there should be several types of cover available for you to choose from, such as Third Party only, Third Party with Fire & Theft, and Comprehensive Cover.
●Your driving track record: Previous claims, such as the number and scale of accidents that you have been involved in, if any, are considered.
It’s better to ask questions
Steyn says the first step is always to make sure you know what kind of insurance you need for your vehicle.
To make sure you get the best deal possible, it’s always advisable to have a set of questions ready to ask your insurer when going over your options.
Your budget may dictate that you opt for an option with a lower premium, but then it is important to have access to savings or an emergency fund with which you can pay the higher excess when you do need to claim.
“Ask yourself whether you will only need the basics covered, or whether you’re looking for a plan that includes a bit more”, says Steyn.
You can adjust your premiums by asking your insurer the following questions:
● Can my excess structure be changed to lower my monthly premium?
● Are there add-ons included in the default package that can be removed to reduce the premium? An example of an add-on benefit is car hire (access to a rental vehicle while your vehicle is being repaired) or a drive-me-home service.
● Do you offer any discounts or cash back in months when I drive less and when my car is parked in the garage most of the time?
Insurers should allow you to change your cover to what suits you. The trick is to strike a good balance between your premiums and your excess.
According to Steyn, there are three further considerations to ensure you get the best car insurance deal:
● How easy is it to interact with your insurer? If it’s hard for you to chat with your insurer, it could be a warning sign. If your insurer has invested in an app or a website that provides you with a seamless and speedy sign-up process, this can also be an indication of how stress-free it may be to deal with the insurer in the case of something going wrong.
● Other drivers: Will your sibling, parent or partner drive your car from time to time? If so, make sure that your policy covers accidents made by other drivers.
● Annual adjustments: Check in with your insurer annually, rather than allowing your policy to roll over without you noticing the renewal date. Make sure the information on your policy reflects your current situation and update them if something has changed.
Christiaan Steyn is the head of MiWay Blink.
*The views expressed here are not necessarily those of IOL or of title sites.