Among all the different car insurance companies in South Africa and the variety of car insurance products that we have to decide between, you’d think that we were spoiled for choice. And you’d be right. But did you know that in addition to all this choice, there are also some insurers who give you the freedom to choose your own basic car insurance excess?
A basic excess is the amount that you pay first when you claim, and it used to be that we just accepted the excess amount that the insurer provided us with together with our premium. But now, you can choose your excess.
The reason why this is a big tick in the ‘win’ column is that the excess amount that’s calculated and noted on your policy schedule plays a role in the price of your premium. To put it simply, a higher excess will result in a lower monthly premium and a lower excess will, yes, you guessed it… Result in a higher monthly premium. Kind of like a seesaw.
Depending on your decision, your basic car excess could be anything from just R1,500, all the way up to R17,000. But before you get all giddy at the thought of bringing your monthly premium right down to the ground by hiking your excess up to the stars, check out these important tips so that you’re prepared to make the best decision.
Long term affordability vs eventual affordability
What we mean by this is the fact that you have to consider the long term affordability of your monthly car insurance premium, while at the same time factoring in the affordability of the actual basic excess amount that you’ll pay in the eventuality of an accident.
The eventual affordability
While paying the basic excess is a non-negotiable when you claim, the amount totally is. With the right insurer, you can play around with the excess amount to influence your premium. The thing is, if you choose a higher basic excess of, let’s say around R7,500, to reduce your monthly premium, then you need to think about whether you can actually afford to pay this figure if you claim.
Imagine that you get into a little fender bender that costs around R6,500 to fix up. With an excess of R7,500… It might not be worth claiming at all. So now you’re between a rock and a hard place.
You also need to think about any additional excesses listed on your policy that you’ll need to pay. For example, if the driver at the time of the accident is NOT listed as the regular driver on your policy and is under 25 years old, then you’ll have to pay additional excess amounts. These are non-negotiable and are set at a flat rate (so no wriggle room there) on your policy schedule.
Now imagine that the little fender bender happened when your 22-year-old cousin was behind the wheel. Your excess isn’t just R7,500 anymore, it’s a lot more, and you more than likely won’t claim… And you still have to repair your car. And pay your car insurance premium.
The long-term affordability
Of course, dropping your excess to R1,500 might not be the best choice, either. By choosing a ridiculously cheap excess you’ll have made sure that you can afford to settle things if you have to claim, but it may also bring your premium to an amount that could to put you in a prickly financial situation.
Simply, you’ll have to pay that higher premium every month and you might even decide to cancel your insurance altogether because of the expense, leaving you unprotected in the long run.
The verdict?
Clearly it doesn’t help to just think about how low you can make your premium go if you won’t be able to pay your excess if you have to claim. It also doesn’t help to only think about being able to afford the excess.
You need to find a balanced amount for both costs. This mean taking a long, hard look at your finances to see what amount you can afford to pay on a monthly basis so that you’re covered against theft, accidents, and third party damages. Once you’ve determined what makes sense for your monthly expenses, you can work out what you can afford to pay out for the excess if you need to claim.
If you feel like your excess might be a little excessive or are looking for insurance for the first time and want to make sure you get the best deal, then you need to shop around and compare premiums from insurers who give you the freedom to be flexible.
Take King Price, for instance. The royal insurer lets you adjust your excess and influence your premiums. More than that, if you get comprehensive car insurance with them, they’ll automatically reduce your monthly premium by taking into account the depreciating value of your car.
This way, you can get the balance right between your monthly premiums and your basic excess, while watching your premium decrease every single month. If that sounds good to you, just click here for an obligation-free quote.