Is Cancelling Your Car Insurance A Bad Long Term Financial Decision!
Of course, it makes perfect sense to cancel your car insurance: lockdown meant that you were not really using your car all that often. In fact, some of us are still working from home.
You are hardly out and about except for those once a week grocery runs. So why keep insuring, right?
Well, the truth of the matter is, even if you made it through this period without an accident, it is those unexpected and unforeseen mishaps that we should plan for.
There may be some key elements you did not factor in when you made the decision to cancel. For some if us, you could be paying much higher premiums now and here are some of the reasons for this:
1. Cancelling Insurance Negatively Impacts Your Risk Profile
Your premium is determined by several factors. A crucial factor being how faithfully you have kept up with your payments. Just like a good credit score will help you when applying for a bank loan, a good insurance history helps you get more affordable rates.
If you have been consistently paying your premiums over the years, you have a better profile than someone who has been doing it for a shorter period. You could qualify for cheaper premiums, dependent on your claims history.
2. Consistency Is Key
Cancelling your insurance even for a few months during lockdown or whilst you travelling less, may mean that your history, which you have built up over the years, is erased and insurers view you as someone starting from scratch. This could mean higher premiums.
3. No Claims Bonus
If your current policy offers a pay out of some amount if you do not claim for certain period, then this benefit will be lost.
Sadly, if you do not consider all the facts before making financial decisions, it could end up costing you instead of saving you. Imagine being a month away from receiving this added benefit without realising it when you made the decision to cancel!
4. Your Bank May Cover You For A Higher Premium
If you are still paying your vehicle off, it is a legal requirement to have comprehensive insurance cover for your vehicle.
We have received an increase in requests from Banks wanting proof of insurance from clients. Where this cannot be provided banks are automatically including insurance cover to monthly instalments. Should this happen, you will not be in control of what policy option they decide on, and you may find yourself paying for one that is more expensive.
It will be in your own interest if this decision is not taken out of your hands. You are in the best position to judge what works for you.
Rather Shop Around For A Better Deal Instead Of Cancelling
Whilst many insurers have quickly “come to the party” by offering discounted premiums for a limited period during the earlier months of lockdown, we do understand the financial impacts are still being felt even now.
So before you cancel, shop..shop..shop around!!
Many of our insurer partners have launched excellent “pay as you drive” or “limited mileage” products, to help ease the financial burden many South Africans are finding themselves in. Most of these products remain comprehensive cover, you just need to understand what happens if you exceed the limits.
Remember, do not only look at the premium amount but the benefits and excesses payable on claims before you decide to replace or cancel your insurance cover.
If the saving in premium is too good to be true, it usual is!! Be careful to weigh up the costs savings and benefit limitations.
Not only will you be able to find a deal that works for you now as you manage your reduced budget during lockdown, but you will also spare yourself the car insurance cancellation fee. In addition to that, you will protect your pocket in the long term by maintaining a healthy insurance history.
To assist with making an informed decision, chat to one of our consultants on 086 162 0000 or sent an email to firstname.lastname@example.org