Cover your assets: Things to consider when buying a car
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By Rory Judd, Head of Online Marketing at MiWay
For many of us the start of a new year represents the ideal time to begin afresh and to finally make good on those promises that were put on the backburner as the previous twelve months sped by. As such, January is typically a time when we start shopping for newer, safer, more contemporary vehicles to tackle those daily commutes and weekends away.
And while it’s fairly easy to settle on the make and model of that dream car you’ve long been after, make some time to carefully consider and pick out the right insurance package for your needs.
According to the Automobile Association of South Africa 65%-70% of motorists are driving uninsured vehicles. If you’re involved in a car accident and it wasn’t your fault, it’s probable the person at fault will not be able to pay for your repairs. Given the fact that a car is among the more valuable assets many of us possess, it’s vital that you ensure it’s correctly covered before setting out on the open road.
It can often be tempting to select a package with a low premium and high excess, but before you find ways to cut down on monthly expenses, you’ll want to make sure you fully understand the bigger picture.
Many car owners only realise they’re underinsured when it’s too late, having failed to correctly cover their vehicle’s value and thus shouldering the financial burden of a written off car, something that can prove financially crippling.
Before you sign on the dotted line, here are a few key considerations for new car owners:
Assess your car’s value
First and foremost, it’s important to understand the differences between retail, market and trade values, as this will influence the amount for which you choose to insure your car. The retail value of your car refers to the amount that it could be sold for on the dealership floor. Insuring it for this value will likely incur higher premiums. However, should your car be stolen or written off, your payout for retail value will be significantly higher than the same vehicle being insured at market or trade value.
You’ll be able to incur lower monthly premiums should you opt to insure your car for its trade value, which is essentially the price you’ll get for it should you opt to sell it to a dealer. Market value, which is the average between retail and trade values, can act as an acceptable middle ground for those looking to remain covered without breaking the bank each month, but it’s important to bear in mind the long-term ramifications of vehicle replacement.
Consider credit shortfall insurance
When it comes to buying a new car, very few of us have the means to make the purchase without some assistance from the bank or a generous benefactor. And while this can be a relatively hassle-free experience, it can become a problem in the event of a theft or write-off, when the insured value of the car and the amount owing to its financier don’t add up. This gap is known as a credit shortfall and can be covered by gap insurance, which is an essential extra for those using finance to pay off their vehicle, particularly in the event of a low down-payment. By selecting this optional extra, you’ll ensure you won’t be obliged to pay off additional interest for a car you no longer own, something that can prove very costly and enormously frustrating in the event of an unforeseen incident.
Given the fact that cars are depreciating assets, it’s important to regularly reevaluate your insurance premiums, as at a certain point you will likely end up paying unnecessarily high monthly fees to cover a vehicle that’s no longer worth what it’s been insured for.
Equally, in the event of electing gap insurance, there will come a point at which you’ll no longer be paying off interest on your loan, at which time the need for this type of cover will no longer be a necessity. So if you want to save yourself money and remain adequately insured, it’ll serve you well to keep your insurance packages under constant review.
MiWay is an Authorised Financial Services Provider (Licence no: 33970)
Date Posted: 2017-02-28
Posted By: MiWay Insurance Limited
Listed under these Business Listing Categories: Financial services,
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