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The costs involved in owning and maintaining a car can be staggering. Regular servicing is required, there are annual licensing fees and not to mention the ever increasing fuel costs! Another of these big expenses is auto insurance, which goes hand-in-hand with responsible vehicle ownership. Even though auto insurance companies calculate their rates differently based on their own risk analysis and profit margins, there are some general guidelines that are sure to help you reduce your vehicle insurance costs. Some insurance companies might place more value on one scenario than another and unfortunately there are no universal guidelines that will lead to a great discount with every insurer, but understanding the following main factors that affect your premium can help you save a little, or maybe even a lot! GROUP ALL YOUR INSURANCE POLICIES AT ONE COMPANY (Up to 10% Saving) Combining all your insurance policies with one insurer could mean significant cost savings. If you insure multiple items with a single company, insurance companies will often offer bulk discount rates because it is more lucrative to them than insuring a single item. You could be able to shave as much as 10% off of your total premium. Some insurance companies may also provide a discount on your car insurance if you also maintain other policies, such as homeowners’ or life insurance with the same firm. DROP UNNECESSARY COVERAGE If you own a car that is quite old and has a low market value, it could make sense to eliminate the comprehensive insurance policy and take out 3rd party insurance only. It is possible to further reduce your insurance costs by eliminating unnecessary cover or insurance that might double up with other policies. Road side assistance, Car rental, Medical and Death coverage might not a big part of your insurance premium, but think twice before paying extra for it. RAISE YOUR EXCESS PAYMENT VALUE (Up to 30% Saving) You can cut your insurance premium considerably by raising your ‘Excess payment’ value. Insurers offer discounts on vehicle premiums if their clients accept a certain amount of the loss associated with a claim. Generally, the higher the ‘excess payment’ value that you agree for, the lower your premium will be. Ask your insurance company how your premium might be affected if you raised your ‘excess payment’ to higher levels. The discounts can typically range between 15% and 30% off the monthly premium, depending on the chosen value of excess. By raising your ‘excess value’ payment, you can make your monthly premium much more affordable, but be sure to have the required ‘excess amount’ in a saving account as you will have to pay it out of pocket when you make a claim. Decide beforehand how much you can afford to spend out of pocket, and then adjust your ‘excess payment’ accordingly. SHOP AROUND (Up to 20% Saving) Every year your existing policy is renewed by your current insurer and often your monthly premium goes up markedly as well. Consider shopping around and obtaining quotes from competing companies every year just before your current policy is renewed. Insurance premiums can vary widely between insurers as their risk analysis based on various factors such as the vehicle make, model as well as your neighbourhood are given different weights. Don’t be afraid to switch from your current insurer - A number of larger insurers will actually offer you a substantial discount, just for switching to them. They will probably charge you a higher premium the following year, but then you could shop around again for the best deal. Shopping around can really pay off, but remember that the cheapest option is not always the wisest decision. Study the documentation carefully and make sure you understand the insurance contract completely and that you are comparing apples with apples. ‘NO CLAIMS’ BONUS – CLEAN RECORD (Up to 5% back) Safe drivers are rewarded with a better insurance premiums. Most insurance companies offer a ‘no claim’ bonus to policy holders who maintains a ‘clean record’ for a specific period of time. With some companies, your premium might decrease every year / month whilst keeping a ‘no claim’ record, in the form of a specific percentage reduction in your premium in the successive year. Other insurers might have a bigger ‘cash back’ pay out after a number of years which increase with each claim-free year. Avoid claiming, and you could save significantly on your premium. LOW MILEAGE DISCOUNT Many of the newer insurance companies offer ‘low-mileage discounts’ to drivers who drive less than average kilometres per year. Less time on the road means fewer opportunity to be involved in an accident, and this often translates into a lower premium for you. Some companies have pay-per-km programs that track your actual distance travelled as well. Low mileage discount programs will make the more sense for drivers who have a short commutes or who rarely drives. Ask your insurance agent about possible discounts if you are an infrequent driver. CONSIDER THE MAKE / MODEL OF YOUR CAR Purchase a sensible car. Luxury vehicles that is expensive to repair, cars that are popular with thieves or vehicles with a poor safety record can be a lot more costly to insure. Buying a huge SUV is exciting, but if you want to make a significant saving on your insurance premiums, the smart choice would be to buy a reasonable car with added safety features as well as a good alarm/immobilizer system or anti-theft devices. Older, used cars are often cheaper to insure than their more modern counterparts. Remember, each car make / model has its own claim record and the insurer calculates the vehicle premiums based on its claim experience. Ask your insurer for a list of the vehicles’ risk levels which you might be interested in. A few companies might also offer a discount for driving a hybrid or alternative fuel vehicle. Cars with heavy fuel use are usually in a higher insurance class, whereas cars that are more environmentally-friendly tend to have lower insurance costs. ANTI-THEFT DEVICES Vehicles that are kept in a locked up garage and/or cars fitted with anti-theft systems are less likely to be stolen, and hence less expensive to insure against theft. Policy holders can lower their premiums significantly if an anti-theft device is installed in the vehicle. Ask your agent or insurance company about discounts offered on any of the following devices: • Car alarm / Immobilizer / Ignition cut-off anti-hijack systems • GPS Tracking devices • Visible wheel or steering locks • VIN chemical etching If the motivation for installing an anti-theft device is to lower your insurance premium, compare the costs of installing such a system with the insurance savings before making a final decision. IMPROVE YOUR CREDIT SCORE The general consumer might not beware of the fact that insurance companies sometimes make use your credit score as part of the criteria for calculating your insurance premium. One might think that your credit score has nothing to do with insurance, but the theory is that people who take good care of their financial situations, will also be a more careful type of driver. Generally, the better your credit rating, the lower your insurance premium will be. To decrease your insurance premium, be sure to pay your bills timeously, and make sure to challenge any credit reporting errors that you might find on your report. ADVANCED DRIVING COURSE (Up to 5% Saving) Most insurers will provide a discount for policy holders who have completed / passed an approved advanced driving course, such as ‘defensive driving’ or ‘accident prevention’. Be sure to ask your insurance broker about this discount before signing up with a specific insurance company. If the sole purpose of such a course is to reduce your premium, make sure cost of the course will translate into a big enough insurance savings. Generally a 3-5% reduction is offered. Also note that insurers recognize that drivers who join motorists clubs generally have lower accident rates, and may also offer further discounts for members. PAY ANNUALLY Paying for your insurance cover annually is significantly cheaper than paying for it monthly. The high cost of insurance may make monthly instalments more affordable and convenient, but costs associated with admin fees, billing statements and / or bank charges due to direct debits quickly adds to the total insurance costs. For more information & automotive articles: www.driveit.co.za Find a used car in SA
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