Factors that influence your vehicle insurance premiums
Many South African consumers, including car insurance holders, are facing financial challenges as a result of tough economic conditions.
Although motoring expenses may be difficult to afford, consumers should review their personal budgets and cut down on other costs before cancelling their comprehensive motor insurance policy.
The high costs that come with an accident means driving without motor insurance could potentially result in sudden financial instability.
Dialdirect is committed to providing value to consumers regarding insurance and encourage examining four critical aspects of their lives that have a direct bearing on their motor insurance premiums, namely, the insured individual, the vehicle, the policy, and the individual’s children.
How you influence your premiums
As an individual there are aspects of your premium amount you cannot control, such as age and gender.
These have an effect on how your premiums are determined, but you can also look at factors to help you bring your premiums down to a more affordable level.
- Driver’s licence – With every additional year you hold a driver’s license your premiums should decrease. The onus is on you to review your policy annually when receiving it in the mail and contact your insurer.
- Vehicle usage – Whether you use your car for personal or business purposes makes a difference to your premiums. Update your policy whenever the situation changes.
- Marital status – Married couples pay lower premiums than single and divorced people. Update your insurance policy if your marital status changes in order to ensure an appropriate level of cover.
- Advanced driving course – Having one under your belt will help you remain safe and claim-free, but will also have a positive influence to your premiums.
- Claims – With each claim, whether for a small scratch or a major dent, your insurance premiums go up.
Review your policy two years after claiming – this is when your insurer will re-evaluate your policy and provide you with possible premium reduction opportunities.
How your vehicle influences premiums
Your car’s value has a direct influence on the cost of your premiums, but there are other factors insurers take into account:
- Retail vs. market value – Although retail value premiums are higher, it’s this dealership equivalent value that represents the full replacement cost of the car.
- Luxury high-performance cars – While these satisfy a particular lifestyle, they bring along a much higher insurance premium.
- Location – The location and immediate surroundings of the vehicle when parked overnight is assessed and premiums are based on the level of security risk.
- Security features – Any extra anti-theft systems like trackers or alarm systems will help bring down your premiums.
- Vehicle model – Certain vehicle makes and models are much more popular than others, this also means they have a higher risk of theft. It’s possible that less popular cars can end up with lower premiums, but ultimately security is more influential..
You are obliged to inform your insurer when making changes concerning your vehicle.
Make sure to check the vehicle values on your policy schedule and clarify any questions with your insurance provider.
How your policy influences your premiums
Shop around for vehicle insurance quotes annually, but carefully compare all variables such as excesses and benefits to ensure an accurate assessment.
- Loyalty – Be aware that when placing business with a new insurer, if the company believes you will change insurer again soon, they may load your premiums.
- Self-insurance – If financially self-disciplined, you may choose to self-insure a portion of your insurance costs and reduce monthly premiums. If you opt to go for a higher excess and insure your car at market value, the savings could pay for the excess and difference in replacement value should you claim.
- No claims – If you haven’t claimed for a period of two years, you may be able to request a discount on your premiums or a cash back bonus depending on the insurer. After receiving a no-claims bonus, you could save this money and increase your excess for the amount you have saved. Apps like the Dialdirect Insurance App is also a good way to instil good driving behaviour and being rewarded with cash back.
Everyone’s financial situation and claims history is different and it is up to you to structure your car insurance policy after careful consideration.
Even if you don’t intend changing insurers, make sure you’re not paying too much on your car insurance premiums.
How your children influence your vehicle insurance premiums
The addition of children affects your car insurance premiums through your family’s various life-stages.
- Safer choices – The tendency is for young parents to trade in their often faster cars for larger and safer family cars, which comes with lower premiums.
- Parenthood – Young family men with children are considered more responsible than their younger, single counterparts and will receive premium reductions
- Combined insurance – Vehicle premiums are generally reduced when combined with home insurance. Couples with children often own their homes and can qualify for this reduction.
- Teenagers – Premiums escalate when teens are included on your policy
Before buying a new car, budget carefully for all associated monthly expenses including bank repayments, insurance premiums and credit shortfall premiums (where required).
Should you use a finance agreement to buy a new car, you are contractually obliged to hold comprehensive insurance for the duration of your finance agreement.
By making all monthly repayments, you build up a good profile at your bank and insurance company, which helps you cut down on your cost of credit and car insurance premiums in future.
Click here for more information about Dialdirect’s motor insurance.
Sources:
Interviews with Christelle Van Den Berg and Sharney Nel from Hippo
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