Most car insurers have a no excess option for policyholders. It may seem attractive initially in that you do not have to pay a large cash sum when claiming. However, a no excess car insurance policy is more expensive. It significantly increases your monthly premiums and may be difficult to sustain if you are on a tight budget. Fortunately most car insurers have intermediate options. Policy holders can select a lower excess for a slightly higher premium if the no excess option is unaffordable.
Zero Excess at Claim Stage
Your car insurance premiums are not the only cost for covering your vehicle. Insurers levy an excess at claim stage which is your responsibility to pay. This excess is essentially a co-payment that is payable to the panel beater for accident damage repairs. In the event of vehicle loss through theft, hijacking or extensive damage (write off), the excess is deducted from the amount paid out to you. Either way, you will be out of pocket for anywhere from a few thousand rand to as much as 10% of the vehicle’s value.
The only time that the insurer will reimburse the excess is if the accident was not your fault and they were able to recover the excess from the other party. This does not always occur, especially when the party at fault is uninsured. Considering that as many as 7 in 10 vehicles in South Africa are uninsured, the chance of recovering your excess in these cases is often slim. This is not a concern if you opt for car insurance with no excess.
Lower Excess, Higher Premiums
There are two main reasons why insurers impose a car insurance excess. Firstly this large co-payment at the time of claims helps to lower the monthly car insurance premiums. The other main reason is that an excess detracts policy holders from claiming unnecessarily and excessively. It works alongside the no claim bonus incentive to prevent this type of ‘over claiming’ behaviour. However, an excess does not have to be mandatory if you can afford car insurance cover with no excess.
Every vehicle owner is searching for affordable car insurance. Apart from various factors like where you park your car at night and satellite tracking, you can also offset the premiums against the excess. By opting for a higher excess, your premiums will be lower and vice versa. However, it is important to maintain a sustainable balance. You may be keen on the no excess option but can find the higher monthly insurance premiums difficult to afford on an ongoing basis. It is therefore important to plan your budget carefully.
Helpful Tips for No Excess Cover
If car insurance with no excess is not an affordable option, then you need to be financially prepared for the co-payment. You can never be sure when a calamity may strike and you will need to pay an excess. Remember that a panel beater will not release your vehicle after it has been repaired unless you excess is paid in full. Planning ahead will allow you to absorb the financial impact of the excess at claim stage.
- Save monthly towards the excess and keep it separate from your ‘rainy day’ fund. Do not tie up this saving in a fixed deposit that may take weeks or even a month to withdraw.
- Ask your car insurer about the extra benefits and incentives that are available if you are a senior citizen. Some insurers offer no excess cover as standard car insurance for pensioners.
- Rethink how you pay for car insurance. Your insurer may allow a single annual payment and offer you a discount in return. This can make a no excess policy more affordable.
- Shop around among different car insurers at least once a year. The industry is competitive and car insurers are often willing to incentivise new customers with lower premiums. This can make car insurance with no excess more affordable.