The commemoration of Transport Month in October highlights the vital role of access to reliable transport in individuals’ prosperity and the economic development of South Africa.
Despite these reminders, the persistently high number of uninsured vehicles, ranging between 65% and 70% of all vehicles in the country, shows a lack of appreciation for the importance of protecting what is arguably one of the most important economic enablers for many, and one of the most valuable assets they possess.
“For many South Africans, a car represents a major investment and a crucial part of their mobility,” emphasises Lebo Gaoaketse, Head of Marketing and Communication at WesBank.
“However, in an effort to reduce monthly expenses, some car buyers elect to cancel their comprehensive insurance policy shortly after taking delivery of their financed vehicle,” he observes.
“This action carries significant financial and contractual risks,” Gaoaketse cautions.
Breach of contract and the consequences
It is a standard, non-negotiable condition of any vehicle finance agreement in South Africa that the financed asset must be covered by comprehensive insurance for the entire duration of the loan.
Cancelling this insurance policy constitutes a breach of the vehicle finance contract. The implications of this breach are severe and could leave the car owner in a precarious financial position.
If the uninsured vehicle is stolen, hijacked, or damaged beyond repair, the car owner remains fully liable for the outstanding debt to the finance provider. They would be forced to continue paying monthly instalments for a vehicle they no longer possess or can drive.
Vehicle finance providers are, therefore, legally entitled to ensure compliance. They may initiate regular checks to verify the existence of a valid comprehensive insurance policy.
If a customer cannot provide proof of insurance, the financier may be forced to institute a limited insurance cover to protect their interest against total loss. The premium for this cover is then debited to the customer’s account, added to the monthly instalment, and is usually a limited form of cover that excludes options such as third-party cover.
Word to the wise
In a challenging economic climate, the temptation to cut costs is understandable, but insurance should not be the item to sacrifice.
Emphasising the importance of continuous coverage, Gaoaketse says: “Comprehensive insurance is a non-negotiable safety net. When a vehicle is financed, it’s compulsory to maintain comprehensive cover, as stipulated by the finance contract and supported by the National Credit Act.
“Cancelling your insurance, particularly during tough times, is a short-term saving tactic that can result in a catastrophic, long-term debt burden. Should the worst happen, the buyer remains liable for the full loan settlement on a vehicle they no longer have. This is why we advise customers to review their policy for possible premium adjustments rather than cancelling it altogether.”
Granola
US$ reserves: When it comes to holding the glorified US$, South Africa ranks 32nd out of 165 countries in terms of the size of its US$ reserves. South Africa is ranked ahead of Australia, Sweden and Chile. The USA ranks 17th, the UK 23rd, China is ranked 1. The size of a country’s US$ reserves is a reflection of its export market. South Africa clearly has a favourable export market. Again, a good market to be in for any start-up.