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Comprehensive insurance is a must for financed vehicles
Insurance, while often overlooked, serves as a critical risk management tool and acts as a safety net against potential financial losses that may arise from unfortunate incidents. By mitigating the impact of unforeseen events, insurance plays a pivotal role in financial planning and security.
While this applies to various types of insurance, particularly vehicle insurance, some vehicle owners who haven't made any claims for a long time often think they don't need it anymore and decide to cancel it. In terms of the actual figures, the South African National Roads Agency (SANRAL) estimates that between 65% and 70% of the estimated 12 million cars on South African roads are uninsured. This statistic is particularly concerning given that the agency also reports over 800,000 car accidents occurring in South Africa annually, while Tracker, on the other hand, has reported an increase in car theft and hijackings.
It’s only when we study these statistics that we get to understand the significant risks faced by vehicle owners, and without comprehensive insurance in place, car owners remain exposed to substantial financial risk in the event of the abovementioned incidents. This is where comprehensive insurance comes into play since your car is covered against damage from collisions, fire, theft, third-party claims, and other unforeseen events, which is crucial, especially if a vehicle is under finance.
The National Credit Act (NCA) states that a credit provider may, during the life of the credit agreement, require a customer to maintain insurance covering the loss or damage to the financed property. This agreement is often overlooked by buyers who choose to cancel their car insurance soon after taking delivery of their vehicle from the dealership, not knowing that in the unfortunate event that the car is involved in an accident, the person who has entered into the finance contract will be liable to pay for repairs and any possible third-party claims.
Also, having insurance in place gives customers peace of mind knowing that the liabilities will be settled if the financed car is damaged beyond repair or lost.
Though economic downturns can make it tempting to cancel things like insurance because they appear to be an unnecessary expense, it is best to review one's policy to see if the premium can be reduced rather than being cancelled. Some insurance brokers may offer rewards, which may make the policy more cost-effective if the customer has remained claim-free for a certain period or if their vehicle usage pattern changes.
It’s worth noting that customers must be completely truthful when discussing risk profiles with an insurer, as false information might compromise their coverage when submitting a claim. Also, it’s important to read your policy schedule carefully to understand what’s covered in it and what is excluded.
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