Although South Africa’s economic growth depends on many different sectors, this year’s Transport Month has highlighted just how vital reliable transport is, not only for individual progress but also for the country’s overall development.
That said, the persistently high number of uninsured vehicles in South Africa, estimated to be between 65% and 70% of all vehicles on the road, reflects a worrying lack of appreciation for the importance of protecting what is, for many, both a key economic enabler and one of their most valuable assets. It’s well known that a car is both a major investment and an essential means of transport for many South Africans. Yet, some buyers choose to cancel their comprehensive insurance shortly after taking delivery of their financed vehicle, often as a way to cut down on monthly costs. This, in turn, entails significant financial and contractual risks.
Breach of contract and the results
In South Africa, all financed vehicles are required to have comprehensive insurance for the full duration of the loan, a standard and non-negotiable condition in vehicle finance agreements. Cancelling the policy constitutes a breach of contract, which can carry serious consequences and potentially place the car owner in a difficult financial position. In an unfortunate situation where the uninsured vehicle is stolen, hijacked, or damaged beyond repair, the owner remains liable for the outstanding debt to the finance provider. This means that they would be required to pay monthly instalments for a vehicle that they no longer have or can drive. As a result, vehicle finance providers are legally entitled to enforce compliance and may conduct regular checks to confirm that a valid comprehensive insurance policy remains in place.
If a customer fails to provide proof of valid insurance, the financier may be compelled to implement a limited insurance policy to safeguard its interest against total loss. The cost of this cover is then added to the customer’s monthly instalment, and typically, it offers minimal protection, often excluding benefits such as third-party liability cover.
Word to the wise
In tough economic times, the urge to cut back on expenses is understandable, but insurance should never be the area to compromise on. Comprehensive insurance serves as an important safety net. For financed vehicles, maintaining such cover isn’t optional and is a legal requirement outlined in the finance agreement and reinforced by the National Credit Act. Cancelling your insurance, especially during financially challenging periods, may offer temporary relief but can lead to devastating long-term consequences. In the event of a total loss, the buyer remains responsible for the outstanding loan on a vehicle they no longer possess.
That’s why WesBank encourages customers to explore options for adjusting their premiums, rather than cancelling their cover entirely.
