Are You Paying for Too Much Car Insurance?

Are you spending too much of your hard earned money on insurance? Two academics actually put together a paper for the Journal of Economic Psychology back in 2008 to say as much. Zur Shapira (from New York University) and Itzhak Venezia (from the Hebrew University of Jerusalem School of Business Administration) found that their subjects would rather take a full, expensive insurance policy rather than a less expensive one with a deductible (in South Africa, that would be your excess that you have to pay before the insurer pays out). At the end of all their studies they found that people would rather spend more than consider options. And, although we are in February, it still feels like the beginning of the new year. We are still recovering from the festive season binge which included not only food but finances. Perhaps we should rather consider the a la cart power of choice rather than a set menu that you are unlikely to fully make use of.

You might be surprised to learn that since I returned from overseas and began driving around in Johannesburg about twelve years ago, I’ve only had one incident where I had to take my car to the panel beaters. I had a minor accident with a gate. I had been paying a pretty low premium for the car for ages but I was surprised to learn that my excess was R2000. It was a bit of a shock to me at the time. The fee back then was less than the excess so I landed up not even claiming.

Looking back on the experience now, I understand better that I actually had a good deal. I mean, this is more than a decade of a low cost policy which adds up. There was only one time where I needed it.

As the authors of the paper suggest, people need to be educated about alternatives.

So I thought I’d share with you some of the a la Carte options from Budget Insurance, and you can pick and choose what suits you.

Firstly, with Budget Saver, you get to choose your form of basic car insurance. You can select cover for:

 

• Total Loss – meaning that you get an insurance payout in case your car is damaged beyond repair or if the car has been stolen and can’t be recovered. I guess you have to weigh up the chances of losing your car altogether. I don’t expect it to happen to me, but you never know. It happened to a teacher friend of mine but she was going through a bad break up at the time and I remember feeling sure that her emotional state at the time was linked to this accident. On the other hand, if it does happen through forces beyond your control, you would need a car.
• Accident – this is the cover you need if your car is ever damaged in an accident. Your payout will generally be determined according to the amount of accident damage, the cover selected as well as other options selected which will be indicated in the Terms and Conditions document you sign. I think this kind of thing does happen eventually to most of us – but some more often than others.
• Third-party – this insurance cover protects you against liabilities which are related to a third-party if ever you are involved in an accident. This includes medical fees for the injured third party, repairs to that person’s car etc. In other words if you hit a car, this covers you for their expenses and not your own. One of my best friends that I worked with as a receptionist in my twenties only had this insurance – it’s an affordable option when you are young and want to keep costs down.

 

Once you’ve chosen the type of cover that you want, you are then informed by the insurance provider about the added benefits of your particular insurance choice. There are two benefits which you get automatically, irrespective of which insurance policy you decide to choose. You will get Accident Assist, which includes cover for towing and storage (when you call the approved towline) and you also get Loan Assist. The latter benefit helps you get a loan to pay for your car at no extra cost to you.

 

Finally, you also get additional cover options which you can choose to meet your specific insurance needs. You can either get

• Car Hire – whenever your car is in for repairs and it impacts on your day-to-day activities. Being stuck without a car would be terrible for most of us, unless you have someone to cart you around.
• Tracking – this will not only help you decrease the risk insurance premium you pay on a monthly basis, however requires you to pay for the monthly subscription, it can also allow your car to be found if ever it’s stolen. This is definitely one of the more recommended options. (I confess, I don’t have this).
• Radio Cover – this one is mostly for older cars. A large number of the cars which are built nowadays have radios which are a part of the dashboard and cannot be removed, which would need to be specified when contacting companies for an insurance quote. I don’t think this would apply to most of us. I do have a new car radio now with a removable front, but personally I don’t think that people are going to bother with my old Mazda anyway.
• Windscreen Cover – this is another highly recommended option. Windscreens are prone to hairline cracks and fractures depending on which part of the country you live in and the prevailing weather. Do your homework about the conditions you will be driving in before deciding on this one.
• Additional assist – this could be anything from trauma counselling, to helping you fit a tyre in terms of roadside assistance, or even keeping you company on the phone as you wait for the tow-truck which the insurance provider has called on your behalf.
• Hail Cover – In terms of body-work, hail can come from different sides and make small dents which are hard to repair and generally create such damaging conditions that your car may be written off. It’s best to get this form of cover just in case, especially if you don’t have a garage for your car.

 

 

I’ve noticed that you can now buy one of the world’s biggest soft drinks with your name on it. If you can brand your drink, why not brand your insurance with your own personal style?

If you want your insurance to work for you, why not customise it today?

 

Choose to save instead of over spending.

 

 

This post was sponsored by Budget Insurance.

 

Comments

comments