We have discussed on the Car Insurance Blog at carinsurance.arrivealive.co.za the elderly and their need for car insurance. We have identified this age group as a specific risk grouping and also referred to the fact that they do not contribute to significantly more accidents than other age groups.
This is mainly as a result of their ability to adjust their driving with specific reference to:
- reduced driving distances
- driving at times when roads are less congested
- the value of their driving experience
The elderly vehicle owners are struggling financially
We are living in challenging economic times – and no-one struggles more financially in these times than the elderly. It has been revealed that South Africa’s low interest rate climate is putting the squeeze on some senior citizens.
Most of them are dependent of fixed incomes and are increasingly tempted to economise on household costs by cutting or cancelling their short-term insurance – sometimes with disastrous results.
Some insurers have gone to great lengths to warn the senior citizens about the dangers of senior non- or self-insurance.
FNBIB General Manager Marketing, Debbie Barret has revealed the full impact of low interest rates on pensioners who are dependent on fixed interest investments for retirement income:
- They are desperate to reduce monthly household costs and are cutting non-essentials.
- Unfortunately, they sometimes cut back their monthly insurance premiums, too. The consequences can be disastrous.
- There is already anecdotal evidence of old people who suffer severe damage to their houses and major losses on their household contents and have no hope of paying for proper repair or replacing their possessions.
- The real danger is that older people making these false economies may face huge claims to cover their third-party or personal liability exposure. They could be ruined.
FNMIB provides short-term insurance advice to senior citizens
FNBIB has emphasized the need for education about these pitfalls and to stress that accident and property loss can happen to everyone!!
It is important to remember the following four basic educational points:
- Self-insurance is practised by some individuals, but is most appropriate for high net worth individuals who create a cash reserve and have the discipline to keep this contingency fund intact. Self-insurance for the average consumer is apt to degenerate over time into non-insurance, leaving the individual exposed to dire financial risk.
- In cases where individuals believe they can make a degree of self-insurance work, they should adopt a prudent and selective approach. Being uncovered for third-party and personal liability risks can be disastrous. Self-insurance in some risk categories can expose the family to multi-million-rand claims. Consumers should seek the advice of short-term insurance professionals on these issues.
- The experience and prudent lifestyles of some older people can result in lower risk in certain instances. This is reflected in some pricing structures. For example, some products offer special rates for older people or those living in a more secure environment. Pensioners should contact their broker to ensure they derive maximum advantage from cost-efficient provisions such as these.
- Regular reviews should be carried out with a broker to ensure an individual’s short-term portfolio remains appropriate to lifestyle needs. After downsizing, certain possessions may be removed from all-risk cover, for instance. As a motor vehicle ages, its market-related replacement value usually falls. By adjusting these values on the policy, it is often possible to reduce the premium. Explore options such as these in consultation with a reputable broker.
Barret noted: “It is true that some disciplined and prudent older people are less exposed to certain risks than younger people. But older people must remember that in some respects they are more not less vulnerable.
“For example, a younger person earning a salary may have the earning power to replace losses and repair damage. A pensioner reliant on a fixed monthly income often lacks the financial resources to make good a major loss.
“This is one more reason for thinking twice about any drastic cuts in your insurance provisions. This month’s cash saving can be next month’s financial disaster.”
[Source: FA News (12th April 2010)]
Advice to the Elderly Vehicle Owner
We would like to urge all senior citizens to approach their car insurance with the same caution as they do with their driving. If it is financially impossible to continue paying for comprehensive car insurance – consider taking out third party, fire and theft insurance!
Cancellation of car insurance should be the very last resort – consider other options first:
- Compare quotes to find the most affordable premiums
- Consider car insurance products stripped of additional benefits that you might not need
- Remember that you are not alone – others are in the same position – do not be afraid to seek advice and assistance!!