Don't ignore 'optional extras'

South Africans are on a record breaking car-buying splurge; but often don’t understand the insurance implications and potential additional cost of when they forget to insure ‘optional extras.’

Santam Chief Executive Steffen Gilbert says, "Few people find out beforehand what impact their decision will have on their motor insurance costs – often to their financial detriment later on.

“When one buys a car you need to be aware of the fact that you will only be covered for everything that is standard on the car. So if you add air conditioning, alloy mag wheels, radio/CD, and electric windows you should take out additional cover, which should be clearly stated in your policy.

If for example you buy a car for R100 000 and the extras cost R20 000, you can’t just take out insurance for R120 000 – this is seen as over-insuring your vehicle because the extra R20 000 is not for the optional extras but for the car unless the breakdown is specifically stated in the policy."

“So you should insure your vehicle for a sum total of R120 000 but your policy has to state the amount that covers everything that’s standard, and an item by item breakdown of the costs of all the extras that should obviously sum to R20 000.

Insurance cover is nearly always last on the list of things to be arranged when someone buys a new car. And once they discover that insurance will cost them quite a bit more there is a mad rush over quotations, available options and negotiations with brokers and insurers."

Gilbert says the best advice is to start arranging vehicle cover at the same time that you begin to consider a specific vehicle. He also warns that insurers should also offer people the option for additional or ‘top up’ insurance in the event of writing off a car within the first few months of purchase.

“If your vehicle has to be written off within the first year of the agreement you could suffer a severe financial blow due to the declining market value from a new car to a used car, coupled with the high amount often outstanding on the loan.

"And, do not forget that when a vehicle is written off or stolen the insurance payout is made directly to the financing institution. Any difference that is still outstanding remains the client's responsibility if it is not covered by the policy.”