Why Cancelling Your Car Insurance Is a Bad Long-Term Financial Decision

 

It made perfect sense: lockdown meant that you were using your car far less. You avoided the morning and afternoon commute, and only popped out to the supermarket or pharmacy once a week. So why keep insuring, right? Well, the truth of the matter is, even if you made it through this period without an accident, there are key elements you maybe didn't factor in. Here's what you didn't consider, and why you could be paying much higher premiums now:

 

Cancelling damaged your insurance profile

 

Your premium is determined by a number of factors, which include how faithfully you've kept up with your payments. Much like a good credit score will help you when seeking a loan from the bank, having a good insurance history helps you get more affordable rates. If you've been faithfully paying your premiums over the years, you have a better profile than someone who has been doing it for a shorter period of time – and you can get cheaper premiums. This, however, only applies if you haven't filed any claims.

 

Consistency is key. Cancelling your insurance even for a few months to "spare" yourself during lockdown may mean that your history, which you have built up over the years, is erased and insurers view you as someone starting from scratch. That could mean higher premiums.

 

Your vehicle financier may have insured it anyway, at a higher cost

 

If you are still paying your vehicle off, the company financing it may choose to take out an insurance policy on your vehicle and add it to your monthly premiums. Should this happen, you will not be in control of what policy option they decide on, and you may find yourself paying for one that is more expensive.

 

It is always better when these decisions are not taken out of your own hands. You are in the best position to judge what works for you.

 

Rather shop around for a better deal

 

The free comparison tool on Hippo.co.za lets you shop around and compare car insurance quotes from leading financial services companies. Not only will you be able to find a deal that works for you now as you manage your reduced budget during lockdown, you will also spare yourself the car insurance cancellation fee. In addition to that, you'll protect your pocket in the long term by maintaining a healthy insurance history.

 

This article is for informational purposes only and should not be construed as financial, legal or medical advice.