According to vehicle financier WesBank, as many as 70% of vehicles in SA are uninsured.
The company said the figure indicated poor appreciation for the importance of protecting what is a key economic enabler, with a car often being one of the most valuable assets one might possess.
“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,” said Lebo Gaoaketse, head of marketing and communication at WesBank.
“This action carries significant financial and contractual risks,” Gaoaketse cautioned.
WesBank confirmed it is a standard, non-negotiable condition of any vehicle finance agreement in SA 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 may 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 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.
“Cancelling your insurance, particularly during tough times, is a short-term saving tactic that can result in a catastrophic, long-term debt burden.”
