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Wednesday / 19 June 2024
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Warning for South Africans financing their cars

WesBank has warned South African motorists who are financing their cars that they should avoid cancelling their insurance at all costs.

While comprehensive insurance is compulsory to secure a bank loan on a new vehicle, there is a worrying trend of consumers dropping their coverage shortly after taking delivery of their new wheels, or opting to do so later on if they’ve been claim-free for long enough or their income situation changes, in order to save costs.

“This is very risky because in the unfortunate event that the car is involved in a crash, the person who has entered into the finance contract will be required to pay for the repairs required on the vehicle, as well as any third-party claims if there were other people involved,” said Lebo Gaoaketse, Head of Marketing and Communication at WesBank.

“This is worse if the vehicle is damaged beyond repair or if the car gets stolen. The buyer remains liable for the settlement of their vehicle loan, and ends up paying for a vehicle they no longer have.”

Another reason it is unwise to abandon insurance completely is that your credit provider may require you to maintain a certain level of coverage for the lifetime of the contract, as well as ask for proof of coverage at any time.

“This affords the customer the peace of mind of knowing that the debt would be settled if the financed car is damaged or lost,” said Gaoaketse.

Should you no longer be insured, or be unable to provide evidence thereof, the finance house reserves the right to cancel the loan and repossess the vehicle, or more likely, reinstate limited insurance on the car and automatically charge you for it.

Review your policy

If you’ve fallen on tough economic times and are looking at cutting costs it might be tempting to cancel things like insurance, but this could have dire consequences in the unfortunate event that you are in an accident.

WesBank therefore recommends that you rather review your policy with your insurer to see where you can trim the fat and bring down your monthly premium.

“Insurers can review the insurance policy if a customer has remained claim-free for an extended period, or if their usage pattern changes, perhaps as a result of their company adopting a remote working policy. This might result in a saving that makes the cover more affordable,” said Gaoaketse.

“However, when discussing your risk profile, be completely truthful with your insurer because false information might compromise your cover when you submit a claim. Furthermore, read your policy schedule carefully to understand what is covered in your policy and what is excluded.”

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