When taking out vehicle financing the thought of getting a new ride is such an amazing feeling – the terms and conditions of the financing agreements are often the last thing on your mind. However, down the road these terms and conditions might pose challenges when your circumstances change. Here are a few things to keep in mind when you take out vehicle financing:
Ownership
When you take out a loan on an asset (like a car or a house), that asset is still ‘owned’ by the financial institution you take up the loan with. Until the loan is paid in full it ‘belongs’ to that financial institution.
Insurance
Because the asset is not in your name when you take up a loan for a car, the financial institution that you take up the loan with has to make sure that ‘their’ asset (car) is protected against unforeseen events like an accident. That is why it is compulsory to take up comprehensive car insurance when you buy a car.
Consequences when you cancel your insurance
Over the lock-down period, many consumers are tempted to cancel their insurance due to change in income. However if you cancel your car insurance and then apply for a payment break on your vehicle finance instalment, it could be declined as the asset is no longer insured and pose a risk for the financial institution that you took vehicle finance with (i.e their asset is not covered against the unexpected).
Your options
Instead of cancelling your car insurance during these trying times, here are a few options available to you – speak to your insurance broker about these options:
- Limit your vehicle cover (if you are not driving).
- Request to remove Value Added Products from your policy such as car hire and or excess waiver etc.
- Remove all risk items from your policy.
- Increase your excess to lower your premium
- Review insured amounts on all non-motor cover
- When your circumstances change back to normal (i.e. your income is what it was prior to COVID-19), speak to your insurance broker to re-instate your insurance as comprehensive insurance covers you against in any event.
Speak to your caring partner
Iemas Insurance Brokers is your caring insurance partner when it comes to all your insurance needs and we can advise you about options available to you – no matter what life throws at you. We can source up to 11 quotations; providing you with insurance cover you can trust and afford. Contact us on 0860 102 383 or visit www.iemasinsurancebrokers.co.za.