Savvy financial decisions: Insure your car for correctly

Published Date: 10/16/2023
Source: GENRIC Insurance Company

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Chris Pretorius - GENRIC Insurance Company

Savvy financial decisions: Drive your car for longer, pay attention to maintenance and servicing, buy a used model, and insure correctly

 

Some of the world’s best-known financial gurus will tell you that avoiding the temptation of buying a brand new car and rather opting for a used car, and driving your car for longer before replacing it, are two of the best financial decisions you can make – just ask self-made millionaire and author David Bach, financial advisor and show host Suze Orman, Personal finance expert and star of ABC’s “Shark Tank”, Kevin O’Leary and even the Oracle of Omaha, Warren Buffett, renowned for his frugal and simple lifestyle.

 

“It's good advice for a number of reasons. First off, new cars typically depreciate quickly in the first few years. By opting for a used car, you let someone else take that initial depreciation hit. Used cars also often come with a lower price tag, which means you can either save money and pay it off earlier saving on interest costs on your loan, or potentially afford a higher-end model than if you were buying new. Insurance costs may also be lower for used cars, given the lower value. Of course, there's a bit more homework involved, like getting a thorough pre-purchase inspection and checking the vehicle's history report, but the potential cost savings and value can make buying used a smart move,” explains Chris Pretorius - Chief Underwriting and Claims Officer at GENRIC Insurance Company Limited.

 

“The caveat of course, is that your vehicle is well-maintained and serviced regularly to ensure not only longevity and roadworthiness, but also safety on the road. You should also protect yourself from the sting of any potential major parts failures no longer covered by the manufacturer’s warranty which is usually 100 000km or 5 years - whichever comes first, as well as managing the out-of-pocket costs of services and shortfalls that may occur with a used vehicle no longer covered under a service plan. If you’re financing your vehicle purchase and it’s still a relatively new model less than two years old, such as a demo model, then you also need to look at any potential for a credit shortfall if the vehicle is stolen or written off while still newly financed,” adds Chris.

 

GENRIC offers the following tips for insuring your vehicle – whether you’ve just purchased a new ‘used’ model, or made the savvy decision to drive your current chariot for a few years more: 

 

Get cover for major mechanical failures

• A new vehicle typically comes with a basic manufacturer warranty which would cover any mechanical and electrical parts for repair or replacement should they fail within a certain mileage or age – usually under 100 000km or anywhere between two to four years, manufacturer dependent. With a used vehicle however, these warranties may already have lapsed which leaves you at risk of costly ‘out of manufacturer warranty’ breakdowns. In such circumstances, a Mechanical Warranty Insurance policy will provide cover for the repair of your car due to mechanical failures or breakdown once it falls outside of its factory warranty period.
• GENRIC’s mechanical warranty product covers your car for mechanical or electrical failures up to 220 000 kilometres or as long as the car is younger than 12 years old. Over 30 components are covered such as the engine, transmission, gearbox, turbochargers, bearings, cooling system and electrical components. For a relatively low premium starting from around R180 per month, a major mechanical breakdown such as an engine, cambelt or turbocharger failure – which can easily top R30k or more in costs – will be taken care of and you won’t have to fork out the full repair cost from your own pocket. 

 

Service and Maintenance Plans

• A Service and Maintenance plan provides cover for the scheduled service and maintenance that your vehicle will need at certain mileage or time intervals, whichever comes first. Instead of paying for the service in one large upfront lump sum, you pay a much smaller, more affordable monthly payment which will go towards the cost of your car service. The benefit is that paying a few hundred Rand per month is a lot more affordable and manageable than having to instantly pay a large sum of a few thousand Rand, especially if it’s a major service.
• Depending on the option you choose and the make of your vehicle, your service plan will typically cover the general service components such as the air filter, engine and transmission oil, brake fluid, coolant, fuel and oil filters, pollen filter, spark plugs, sump wash and related labour, subject to the policy limits. Under the maintenance component of your plan, you get the added protection for the replacement and repair of the wear and tear parts too! 
• Don’t forget that regular servicing of your vehicle, usually every 15 000 kms or once a year, ensures not only that the likelihood of a major mechanical fault is minimised, but also improves your fuel efficiency and overall performance.

 

Insure your vehicle for theft and accidents

• Insure your vehicle correctly for theft and accidents. The cost of your insurance is influenced by many aspects such as the make and model, cost and availability of parts, whether you are using the vehicle for business or personal purposes, the age of the regular driver (young, inexperienced drivers typically pay more for insurance) and the security measures such as an immobiliser or tracking system and where it is parked overnight. Always disclose all relevant information that the insurer requires including any extras on the vehicle, to avoid having a claim declined or a claim pay-out being less than expected.  
• Always insure your vehicle for its ‘retail value’ – this is the price at which the dealer will sell a used vehicle to you, versus ‘market value’ which is the value you could expect to sell the vehicle for, and is typically less than retail value. Given the big increases in used vehicle prices, it’s important to check that the insured ‘retail value’ is still appropriate given the changed market circumstances. 

 

“By adopting a comprehensive approach to insuring your ‘used’ vehicle, you protect yourself from the hard financial knocks should something go wrong – whether that is an accident or theft, a major component breakdown, or a major car service which comes at a significant upfront cost,” concludes Chris.

 

T’s & C’s apply. For more information visit https://www.genric.co.za

 

GENRIC Insurance Company Limited (FSP 43638) is an Authorised Financial Services Provider and licensed non-life insurer.