Why your vehicle insurance is so high

As a car owner, you probably thought that your car insurance should go down every year if you don’t claim, but that might not be the case.

You might think that there is a good reason for the premium being reduced, such as the value of the vehicle decreasing each year and the fact that if you are not claiming it will mean you are a safe driver.

There is, however, a lot that goes into the car insurance renewal process that you should know.

An insurance policy is an essential item if you are a car owner and it comes with the peace of mind of knowing that, should your car get damaged or stolen, you would be covered from heavy financial loss. It runs on a month-to-month basis, however, you can exit it at any time by giving sufficient notice.

Renewal

At some point, usually after a year, it will come up for renewal which means that the insurer will review the policy and may adjust the premium you have to pay.

It’s important to remember that your premium can increase when renewing your policy even though the value of the car hasn’t increased. This year might be one of those years when this happens because of the knock-on effects of the Covid-19 pandemic, which affect the cost of insuring your car.

Car repair costs are typically split into three components – parts, paint and labour – and the ongoing global supply chain crisis due to the pandemic makes it more difficult to access car parts for repairs, owing to constraints on the shipping industry and supply and demand pressures.

One impact of this is seen in the price of paint, which is said to have increased by at least 6%.

A factor like this impacts the total cost to insure your vehicle, which affects the premium when you renew your policy.

Your insurance premium takes into account the cost of repairing your vehicle if you are in an accident or the replacement cost in the event of a total loss.

The majority of your premium is related to the repair cost for your vehicle since most claims are not total losses.

Factors like labour and prices of car parts going up over the year your car was insured influence the renewal process.

This is why customers may occasionally pay more when they renew.

Understand your premium

Head of MiWay Blink, Keletso Mpisane, said: “There has to be a careful balancing act. On the one hand, the car has decreased in value over the last year.

“On the other hand, if inflation, the cost of labour and the costs of repairs have gone up, they influence the renewal process by impacting the cost to insure the vehicle.

“With this in mind, insurers must carefully weigh up all these factors and strike a fair balance between reasonable increases in premiums, meaning fair practice towards the customer, and their business objectives.

“Depending on the insurer, factors that influence how an insurance premium is initially calculated typically include other aspects like your credit history and where you live, for example. The renewal of a policy, however, also takes into consideration other factors like whether you paid your premiums on time over the last year and whether you claimed within that period,” she added.

Go over your existing car insurance policy and research the process involved before you renew it so that you can understand more about how your premium is calculated.