Fuel hikes could result in insurance dilemmas for cost-saving South Africans

14 June 2018 Christelle Colman, Old Mutual Insure
Christelle Colman, spokesperson for Old Mutual Insure.

Christelle Colman, spokesperson for Old Mutual Insure.

It’s getting tough out there for many South Africans. Not only has the VAT increase and inflation taken its toll but as of 6 June 2018, we are all paying 82 cents a liter more for petrol.

This latest hike in living costs could force many to look for cost-effective alternatives in their daily commutes to and from work. Some might leave their petrol-guzzling cars at home and opt to carpool with colleagues or take public transport.

There have been instances where people have been forced to reduce their spending on the maintenance of their vehicles, or even choose to reduce or cancel their insurance coverage on their car.

“We often find that knee-jerk decisions are made when people are faced with a sudden financial shortage. Cutting back on insurance payments which could cause their policy to lapse, or the maintenance of the vehicle can lead a person into deeper financial distress,” says Christelle Colman, spokesperson for Old Mutual Insure.

She explains that if a vehicle isn’t well maintained, it could have grave implications for the vehicle owner.

“It is a strict requirement by insurers that all vehicles must be maintained in order for the insurance cover to be in place, regardless of whether you have paid your insurance premium. For example, if you are involved in an accident on a wet road and it is found that your brakes failed due to being worn out, or that you skidded into another vehicle because your tyres were smooth, your claim will not be paid out. Skimping on vehicle maintenance is essentially personal financial suicide,” stresses Colman.

In addition, the majority of insurers use credit rating scores as a factor for determining a person’s insurance premium based on their risk profile. By defaulting on credit payments of any kind, it could potentially lead to increased motor insurance premiums, especially at the time of taking out a new policy.

Carpooling: pros and cons

For those who travel longer distances and public transport simply isn’t an option, Colman urges commuters to consider ride sharing or carpooling.

“Not only will this make a considerable difference to the cost of commuting to work but it is also the best way to look after our environment. It’s worth reminding readers that not only can you cut back as much as 75% of your fuel costs if four people share the ride, but you will also be cutting back substantially on the wear and tear of the vehicle thereby saving on maintencance costs. This is based on four people carpooling with an agreement for each person sharing the ride to use their own car for one week of the month,” she clarifies.

However, it must be cautioned that there could be policy restrictions from an insurance perspective so it’s best to check your policy wording before doing so.

With insurance, it is always good to be pro-active by ensuring you understand the conditions of the policy contract. Also, ensure you get all changes and agreements on record either in writing or via a recorded telephonic discussion. You can do this by making a call to your broker or insurer who are obliged to provide you with any advice you may need.

Top tips on saving money while still maintaining your vehicle:

• Consider carpooling to reduce fuel costs when commuting to work. However, as stated above, contact your insurer for possible policy implications;
• Find a broker who will assist in obtaining a number of quotations from various insurers on your behalf to check if you are paying the lowest possible premium, without sacrificing the benefit of good insurance cover;
• Ask your broker or insurer to reduce your insurance premium if claims free or increase your excess which will result in a premium reduction;
• If your negotiations are unsuccessful, consider shopping around for better car insurance premiums;
• Consider increasing the excess on your policy in return for a premium saving;
• If the warranty on your vehicle has expired, look for reputable vendors who will be able to service and maintain your vehicle at affordable prices.

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