Dear Mabs
I am a 35-year-old mother of two and my husband is 39. Our first-born will be going to university this year and she does not qualify for NFSAS as we are both employed. We are drowning in a lot of debt and it has been going on for the last three years and has been a source of frustration.
Our New Year resolution is to drastically cut our costs and tackle our debts. My husband is suggesting that we also stop paying car insurance for both our cars. His car is older and paid off while mine is three years old and still financed. We are both careful drivers and have not had any accidents in five years. If we cut car insurance for our cars for a year, we will save just over R31 000. This is a big figure and will help us pay off our debts. I’m seriously considering it. However, I recall a clause that said the car should be insured and have a tracking device for the duration of the 60 months finance period. Am I obliged to keep paying for insurance I cannot afford?
Mabs Answers:
Congratulations on your daughter’s journey of going to university. I wish her success in the years ahead.
The past few years have been very hard on the middle class and economists predict that this year is going to be even tougher. We need to tighten our belts and make sound financial decisions as a collective. I truly commend you and your husband for coming up with what sounds like a thought-out plan. However, I have to caution you against cutting back on insurance. I know it is tempting and most people see it as a grudge spend. In your case, your agreement binds you to insure the vehicle throughout it being financed. Until you have settled your financier, the asset belongs to the bank. You only receive the ownership papers of the vehicle after you have paid it off. So please ensure that you keep your insurance premiums up to date and avoid issues with your financier. Also, I would strongly advise that your husband does not let go of his car’s insurance. Insurance is there to protect you during times of need. While you might be both cautious drivers, you cannot predict when a drunk driver might plough into your car and write it off. It is during those difficult times that insurance kicks in and protects your assets. Letting go of insurance is akin to financial suicide. If anything could happen to your cars and you were not insured, you would undo any of the gains you seek to make because you would have to pay out of your pockets. However, there are safer ways to lower your monthly premiums and relieve yourself from financial pressures.
Since a car depreciates over time, your insurance also needs to reflect that and your premiums need to be lower. Each year set aside time to call your insurer and ask them to make adjustments to your premiums. If you are not happy with what they are offering you, shop around for cheaper insurance coverage. Just ensure that you are fully covered but are enjoying lower premiums. I wish you the very best as you navigate these financial challenges.
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