The buying of a car is a costly decision and more often than not you find yourself forking out hundreds on everything from fuel to insurance. Trying to cut costs where possible, you gravitate to the cheapest insurance deal available. We explore the pros and cons of choosing an insurance provider based on price.
What should you consider when taking out car insurance?
“Cost, of course, is of primary importance. However, cost is a factor of multiple things including excess structure, additional non-standard items fitted on the vehicle, and with more data savvy insurers, the amount and way that a person drives,” says Jonathan Holden, Innovation Group’s managing executive for insurance.
He further advises that drivers should know themselves and understand the risk and in turn make sure they are covered appropriately.
“The onus is still on the consumer to look after themselves and understand the various elements and potential pitfalls of their policies. After all, paying more does not necessarily mean that every contingency is covered and paying less does not necessarily mean that cover is second-rate,” reveals Holden.
Here are a few simple guidelines to ensure that you get maximum value from your vehicle cover:
-Investigate the different types of cover available: “There are several types of insurance products aimed at providing vehicle related cover. These policies range from third party and fire and theft to total loss. One of the key factors that should influence your choice of insurance cover must be the amount of risk that you can carry yourself. Different cover comes with different price tags. Make sure you know what you’re paying for,” says Holden.
-Understand the conditions of your policy: Every policy has a number of conditions attached. “The time to uncover these provisos is not when your vehicle is being dragged behind a tow truck. Ask questions. Raise the worst case scenario so that you are never faced with a nasty and potentially costly surprise,” explains Holden.
- Declare and cover your vehicle’s extras: “Canopies, tow bars, imported rims and other vehicle add-ons are expensive to replace and do not form part of standard cover. Check that these items are disclosed and that your policy includes all non-factory fitted extras,” adds Holden.
Comparing your insurance quotes
“Some comparison websites make this possible, although it can still be a little confusing. A good broker should be able to assist in providing an informed and impartial decision around cost and benefits. As stated, understand your risk. Understand the true value of your asset, and make sure there is no uncertainty around the quote and level of cover being offered,” adds Holden.
Comparison will enable you to make a better holistic decision because it requires research and the careful weighing up of pros and cons, and it’s here where you realise that the cost is not always proportional to value.
“I would suggest at least three quotes from reputable companies. It is a highly competitive space and each insurer is trying to differentiate their product in the market. The special features of one product may not necessarily have appeal to everybody,” highlights Holden.
Should you go for the cheapest deal or one that offers all the extras?
Consumers should realise that affordability does not always mean the cheapest option, notes Rudolf Britz, chief actuary at Momentum Short-Term Insurance.
Holden agrees as he emphasises that the focus should not be on the money but the value.”If you are satisfied with the cover, and if it is appropriate to your risk, and it is relatively “cheap”, go for it!”
It once again boils down to knowing yourself as a driver and what it is you need. If you can do without the extras then great, but if you know you will need them, then it is wise to opt for the value aspect in catering to your driving needs, as opposed to how much it will cost.
IBV pegs it down to the cover that the insurer is offering, but adds that the benefits should outweigh the price. “The cheapest isn’t always the best, an insurer can match the premium but offer extra cover and benefits. The client must always include a complete portfolio for best results.”
Pros and cons of choosing a car insurer on price?
Cost saving: “If it is your only condition then you will be scoring in terms of forking out a lot less,” describes Holden in the age old debate of money versus value.
While you will be appeasing your pocket, you may be cheating yourself out of value in the long run.
IBV weighs in: “There are no advantages in the South African market, you pay for quality and personal service – service is not like the online global market. One has to always look at benefits that an insurer is offering. If you do not then you will later be faced with high excess payments and limitations on your cover."
When choosing a car insurance deal you need to be realistic about the cover you need as a driver to ensure that you pick the option that will cover you for any eventuality.
What factors determine the cost of car insurance?
The price of the car insurance is usually dictated by what it entails and covers.
IBV highlights the following as contributing factors to price: “Claims, exchange rate, cost of repairs, age, driving history, the residential area in which you live and the insurance period.”
Holden adds that the driver behaviour and track record also play a vital role in determining the cost of the individuals insurance.
How can a person decrease the cost of their car insurance, while maintaining the cover that they have?
“Practicing good risk management can decrease premiums. For example, parking in a secure place both day and night, fitting a tracking device to monitor both driver behaviour and vehicle whereabouts, and ensuring that the correct (depreciated) market value of the vehicle is recorded by the insurance company. Fixing windscreen chips before they become cracks can reduce an individual’s claims experience, further reducing future premiums,” contributes Holden.
At the end of the day, it is important to be well researched to make an informed decision, driven rather by value and your needs as a driver, as opposed to cost. Furthermore, it is vital that you are clued up on what it is your insurance policy covers and how to utilise the benefits to the full.