Insurance on any vehicle is very important to have, and this goes for any type of vehicle you own, whether it’s a brand new car that you have just bought, or a second hand car that own. In line with this, short-term insurers have agreed to the demand from the National Treasury that the insured value of motor vehicles be reduced in line with their market value. This new change will naturally affect the insurance premiums on used cars significantly.
Rising Costs of Vehicle Premiums
For years, many short-term insurers have simply maintained vehicle values at purchase price, thereby levying a higher premium, but at the same time they only considering the reduced market value of these vehicles when it come to paying out claims! This is a huge frustration for second hand car owners as it means that they will pay more for insurance every month, yet they won’t benefit to the same value when they claim. However, no car owner can afford to go without insurance, so second hand car owners should carefully consider their options and choose an insurer that works with them to allow for fair premiums and a reasonable payout based on the current value of the car.
This practice, naturally, means wasted money on premiums for policyholders but also bigger and better profits for short-term insurers. It also leads to more commission for salespeople, because the commissions are usually based on a percentage of the premiums that people need to pay for their insured vehicles. Many insurers have not seen their premiums decrease, even though a couple of large insurance houses claim that they have willingly stopped the practice of maintaining vehicles at purchase price and levying a higher premium but only pay out the reduced market value for motor vehicle when claims are made – matter of facts many premiums have increased.
Getting Your Premiums Reduced
The reason why motor vehicle premiums continue to rise even when vehicle valuations are reduced, are the ever-rising cost of repairs and some protective practices by the motor vehicle industry. Car repairs can be quite costly to do, as parts and services are both expensive. For example, many motor vehicle companies insist that warranties will be valid only if you use their branded car spares for repairs – and in many instances you are only permitted to use their designated repair shops for carrying out repairs. These are all things that can significantly increase the cost of insurance.
Insurance companies ought to insure a client’s car for its current retail value as per the Auto Dealer’s Guide, as this is the best barometer of the amount of money the client would need to buy a similar car should the car be either stolen or written off, therefore the client cannot specify the amount insured on which he pays for cover.
Making sure that you have insurance on a used car is very important, but there will always be many factors that are taken into consideration by your short-term insurance company when you apply for cover for your used motor vehicle.
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