If you are not using your car during the lockdown, you may get a discount on your premiums or you could consider reducing your cover for a few weeks. Picture: 123RF/JAKUB KRECHOWICZ
If you are not using your car during the lockdown, you may get a discount on your premiums or you could consider reducing your cover for a few weeks. Picture: 123RF/JAKUB KRECHOWICZ

Downscaling your short-term insurance cover rather than ditching it is an option if you are cash-strapped as a result of the Covid-19 lockdown, but do so with extreme caution after you’ve exhausted the relief on offer.

Industry experts say to avoid exposing yourself to risk if you downscale, you should ask your broker to restructure your insurance. You may qualify for financial relief insurers are offering, ranging from accessing cashback bonuses early, discounted excess payments in the event of a motor accident, or even premium holidays.

The first insurer announced on Tuesday that it would reduce premiums for all policyholders with vehicle cover. OUTsurance has implemented an automatic, blanket, 15% premium discount on all existing vehicle insurance policies (personal and commercial) for May in recognition of the reduced kilometres traveled and claims frequency.

Relief measures offered by insurers vary widely in terms of scope and who qualifies. Generally, if you have been a regular payer of premiums, you are more likely to qualify than somebody who has a history of defaulting.

You may be able to downscale your vehicle insurance from comprehensive to limited or third-party only. However, if you downscale your cover now, you could face a higher premium when you want to move back to comprehensive cover again, so check with your insurer or broker.

Some insurers, such as Momentum and OUTsurance, are, however, willing to re-instate your comprehensive cover without increasing the premium.

Etienne Du Toit, chief commercial officer at Momentum short-term insurance, says if you downscale your cover during the lockdown and revert to the original cover within 10 working days after the lockdown ends, Momentum will keep your premiums the same, provided that there is no material change in the risk.

Du Toit says downscaling is better than canceling because even if, for example, your vehicle is parked at home because you are working from home, it is still exposed to fire or theft. If your vehicle is financed, your bank or any other credit provider, will still expect you to comprehensively insure the vehicle.

It’s important to remember that you might still be using your vehicle to drive to the shops to buy essentials such as groceries, and you will have no cover for accidental damage if you downgrade your cover to limited or third-party cover.

Natasha Kawulesar, head of client relations at OUTsurance, says policyholders may temporarily reduce their cover, without impacting terms when changing back. A policyholder who has comprehensive insurance on their vehicle, which is not financed, may want to temporarily reduce cover to third party, fire and theft. OUTsurance will, for this period, include cover for natural perils such as flood, fire or hail, which is not generally covered under such insurance.

King Price policyholders can save 60% of their premiums on household content cover and 70% on their motor insurance if they choose to waive the cover for the duration of the lockdown, head of legal, Wynand van Vuuren, says. The biggest risk to household contents is from theft and the 60% of the premium that you pay on this insurance is for theft cover.

If you’re forced to stay at home, the risk of theft from your property is substantially reduced and therefore King Price gives the option of removing theft cover at 60% premium discount, Van Vuuren says. Some insurers are only granting a 10% reduction in premium, but this is not reflecting the change in risk to the insurer.

Similarly, on motor vehicle insurance, King Price gives the option of removing accident cover because the risk of you having an accident is substantially reduced. This will result in a 70% reduction on your premium during the lockdown period, Van Vuuren says, adding that King Price will keep full accident cover in place — essentially for free — during the lockdown period should you have an accident while using your car for essential services, such as driving to the grocery store.

Some policyholders should not waive their cover because they may need to, for example, have cover for a holiday house which is empty, or their house may be situated in an area where home robberies are a significant risk, Van Vuuren says.

Accessing cashback benefits

Du Toit says between April 1 and June 30 this year, if you’re a Momentum short-term insurance policyholder you can choose to receive any cashback bonuses, including a portion of your no-claim bonus and or your “safety bonus” to boost your cash flow.

If you select the early payment of your “rewarder” benefit, the no-claims period will be re-set. For the “safety bonus”, the accumulation period will remain the same, but no bonus will be paid after the next policy anniversary, Du Toit says.

OUTsurance has accelerated access to its OUTbonuses, which vest within the next six months, for its policyholders who miss premium payments between April and June this year. If you miss a premium because you’re in financial difficulty and are within six months of your OUTbonus payment, the OUTbonus will be available to you to use in lieu of premium, Kawulesar says.

Kilometres may count

Discovery Insure policyholders could receive a premium discount of up to 25% on their next premium, but it will depend on how much you drive and the insurer will check your mileage using its telematics to ensure you pay a premium that reflects your risk, Discovery Insure CEO Anton Ossip says.

Discovery’s “motor premium relief benefit” will apply to premiums for May, and will be based on how much you’ve been driving during April. If you drove fewer than 500km in April you will receive a 25% discount on your premium for May for that vehicle; and if you drove more than 500km in April, you will receive a 15% discount, Ossip says.

Premium holiday

If you’re a Santam policyholder and you’re not able to pay your premium, you should contact your intermediary or Santam Direct to structure your policy to best meet your risk and what you can afford, Andrew Coutts, head of intermediated business at Santam, says.

If you have no alternative but to let your Santam policy lapse, you may be considered for premium support from a R135m fund set up by Santam, Coutts says.

The fund will assist individuals as well as small and medium business policyholders who have a solid premium payment history and have managed their claims well, but find themselves under financial pressure from the coronavirus and its consequent lockdown, he says.

Santam will fund these policyholders’ premiums in full, including their Sasria premium, for a maximum of two months. The fund will be managed so that policyholders that may only default for the first time in a month or two will also be supported, he says.

Discounts on excess payments

OUTsurance policyholders will pay a reduced excess for claims during April to June this year to assist with their cash flow. The reduction is 30% of the excess applicable up to a maximum reduction of R5,000, Kawulesar says.