I recently read an important article about the alarming rate of cancellation of car insurance policies and the stance of banks.
South African banks offering vehicle financing to customers have the capability to automatically include comprehensive insurance policies in clients' financing arrangements if customers fail to provide proof of vehicle insurance promptly.
This practice has become increasingly essential in enforcing insurance compliance, particularly as many consumers tend to cancel their comprehensive insurance coverage immediately after driving the vehicle off the showroom floor, thereby violating the terms of their agreement with the financing house or bank.
It is crucial for customers to recognize that insurance serves to safeguard the bank's interests in the event of loss or damage. This aspect is clearly outlined in the overall contract signed with the bank representative or Finance & Insurance (F&I) personnel at the motor dealership.
Another compelling reason for securing comprehensive insurance is to ensure coverage in the event of an accident where the customer is at fault. Without insurance, individuals may find themselves responsible for covering the repair costs of the other driver's vehicle, in addition to repairing their own vehicle. Such scenarios often result in continued financial obligations, including the agreed-upon installment payments.
Currently, only around 27% of South Africans have comprehensive insurance, leaving a significant gap in coverage. This statistic underscores the potential risks and financial perils individuals may face in the event of an accident. Therefore, it is imperative for consumers to prioritize obtaining and maintaining comprehensive insurance to mitigate potential liabilities and fulfill contractual obligations with financial institutions.
We advise clients:
When you want to incur the cost of a new vehicle, you should not only calculate if you can afford the premium. You should include the following calculations to see if you truly can afford the vehicle:
Would you be able to afford the installment if interest rates go up?
Is the vehicle a high risk vehicle or not?
Get an insurance quote and be honest with your broker about your claims history. Give them enough information to provide you with a true cost of the insurance.
Will your fuel consumption increase with the new vehicle?
How much is a tracking device per month?
Its important to include the above variables to your calculation, so that you have a clear indication of the true cost of the new vehicle.
Take a read on the article by my broadband
Should you require advice about your car and household insurance, why not get in touch with us so that we can relook this for you?
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