January 19, 2021
The COVID-19 pandemic has caused a lot of financial stress amongst many South African households. These households may want to consider reducing their monthly car insurance premiums. Cancelling car insurance completely could be a dangerous move and may negatively affect your finances in the long term. We will examine some reasons why you might consider downgrading your car insurance cover in 2021.
Although downgrading means that there will be less cover and protection; you may also be paying for cover you may not need.
Below are several reasons why you might consider a downgrade in cover.
If your car is paid off, this usually means that you are free to downgrade from the obligatory comprehensive car insurance that is required by banks when financing a car.
Moving away from a large city's hustle and bustle to a small country village where crime is low may cause you to consider downgrading from comprehensive car insurance to third-party car insurance.
Your car depreciates from the moment it leaves the dealer’s showroom, and usually hits bottom about 10 years later. The following is a good rule of thumb that could be applied for a possible downgrade from comprehensive car insurance to third-party car insurance: when the comprehensive policy premiums' annual cost exceeds 10% of your car’s current value. On the other hand, if the difference between the two policies' premiums is not much, it may not be worth the move.
If your car is 10-years old and covered with comprehensive car insurance, you might consider downgrading to third-party car insurance. The costs of comprehensive car insurance can instead be used towards a new car you may intend to buy. Think twice though about downgrading if your car is expensive, spare parts are still costly to replace.
Comprehensive car insurance products usually provide fully comprehensive cover for write-offs and accidents, including damage caused by natural fire and disaster, theft, and hijacking. Third-party insurance products however usually only provide cover for damages caused to a third party’s vehicle. There are however some third-party insurance policies that also provide a growing cover for your car as well when it is involved in an incident.
The downgrade will sometimes mean losing the benefit of 24-hour roadside assistance and towing, as well as glass cover. This is however dependant on the insurer. Often, roadside assistance can be added to a third-party policy at a small extra cost.
Car insurance is complex, and that is why this article only supplies information. If you want to obtain car insurance, it is recommended you contact a certified financial advisor for professional advice.
The choice is yours. Car insurance cover should suit your needs and budget. If you are considering downgrading your car insurance, contact PMD for more information on affordable car insurance with unique benefits that include no premium increases.* T’s and C’s apply.
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