7 ways to pay less for car insurance

 ·29 Dec 2021

Many factors go into calculating your car insurance premium, some of them within your control and some not. These range from the areas where and how much you drive, and what you use your car for, through to the type and cost of your car, your claims history, how long you have had your licence, your age, and the security features in your vehicle.

Once you better understand how car insurance is priced, you can take steps to minimise the premium you pay.

Ernest North, co-founder of digital insurance platform Naked, offers some tips about how you can reduce your insurance premiums.

1. ABC (always be covered)

Even if you’re going through a long stretch where you won’t be driving and even if you think your old skedonk isn’t worth insuring, it’s a good idea to maintain constant car insurance. The longer you’ve had uninterrupted car insurance with any provider, the better your premium will be.

If you have regular breaks in your cover, your insurer might think that you only get insurance when you have a higher probability of claiming, for example, when you are going on a road trip. The continuous cover also gives the insurer a clearer picture of your risk over a longer, ongoing period.

TIP: If you think it is not worth insuring your car because it’s too old or not valuable enough, you should still consider third-party liability, which is the most basic and affordable car insurance you can buy.

From as little a R50 a month, it offers basic protection for everything that your car might damage while you are driving it, except for the car itself. Third-party liability will cover the costs when the third party lays a damage claim against you.

2. Go direct, go digital

If you buy your car insurance through a broker or from a call centre, the premium will often be higher than purchasing from a digital-first provider. That’s because the premium will need to cover the broker’s commission or the cost of running a big insurance company with a large call centre.

Digital providers run efficient, automated systems that enable them to offer a user-friendly experience at a lower cost.

3. Be wary of cash-backs and other bonuses

Many providers offer cash-back rewards or no-claims bonuses for not claiming. But someone will need to cover the costs of those incentives and that someone is usually you. In most cases, they will be loading your premium to build up a fund to ultimately cover the payout they expect to make.

In most cases removing this product feature results in a lower premium. Waiting for the ‘cash back’ also limits your options to shop around each year when your annual increase is announced to ensure you’re getting the best deal.

4. Fix minor damage yourself

The more you claim, the higher your premium will be – as simple as that. This is why it makes sense not to claim for those small bumps and scratches. Not only will it not be worthwhile after your excess is taken into account, it will also go into your claims record and set you up for higher premiums in the future.

If the damage is small enough that you can cover it yourself easily, it might make more sense in the long run not to file the claim with your insurer.

5. Drive well and obey the law

Your insurance company will usually ask if you have ever been convicted of drunken driving or if an insurer has ever cancelled your insurance for reasons other than non-payment. This information gives them insight into your driving behaviour and your likelihood of claiming.

If the answer is yes, you may end up paying more for cover, or even not be able to get anyone to agree to insure you at all.

6. Choose your excess

In the past, the excess was usually a given when you received a quote and it would take some back and forth to adjust it. With a digital platform, you can easily adjust factors like your excess in real-time to see how it affects your premium when getting a quote. A higher excess means a lower premium and vice versa.

7. Shop around

If you’re with a traditional insurance company, shop around and get more quotes before accepting their initial premium or their annual increase. Many insurers will offer you a discounted price to bring you on board, then hit you with above-inflation premium increases in the years that follow.

Because you must phone to cancel the policy if you are unhappy with the pricing, the insurer knows it will have the opportunity to offer you a lower premium to entice you to stay.

This is another good reason to go digital. A digital provider has to offer you the best price from the instant you ask for a quote or risk losing your business. You do not need to negotiate with a call centre representative to get the ‘correct price’. And if you find a better quote elsewhere, you can cancel from the app within seconds.

Read: Two drunk driving insurance cases in South Africa that had two very different outcomes

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