By Mishaya Chettiar
When you enter into a finance contract with a bank, the bank is protecting its interests to ensure that you have comprehensive car insurance - in the event that your car gets stolen, involved in a total loss like a write-off and that you would have adequate cover to still pay off your bank loan.
This is written into the terms and conditions that you sign off as part of obtaining vehicle finance. This is to ensure that you have comprehensive car insurance and in the event that you do not the bank has the right to provide it for you.
Consumers are not forced to take the insurance through the bank and it typically is more expensive than what you’d be able to get yourself.
But if consumers do not comply with the terms and conditions of getting their own comprehensive car insurance then they would be subjected to the insurance the bank provides.
At any point they would have the right to cancel that insurance the bank has provided and provide proof they’ve gotten it themselves.
Consumers that get their confirmation of cover to be able to collect their vehicle and get their finance and then cancel it a month later are in breach of contract. They could have their finance revoked and could be in serious trouble so it is best to ensure that you maintain your comprehensive car insurance.
Banks are getting a lot stricter on this because it makes sense.
As a consumer you do not want to be in a position where the bank may not have checked that you have maintained that comprehensive car insurance but then you have a total loss or a theft of a vehicle and you are unable to pay your bank loan.
That will have dire consequences for consumers so it is really important that if your car is financed you need to make sure that you have comprehensive car insurance and that you get it competitively instead of subjecting yourself to the insurance that the bank will default to you.
It is the same as credit life insurance. If you have accounts or any kind of credit, you by law have to have credit life insurance to cover that debt in the event that you die and up until now the credit providers like your JD Group and your banks force you to take theirs. The law has changed, you are not forced to take it from the provider giving you the credit but you are forced to have it. They will tell you that they are giving you this because it is by law, you have to have it which is true, but you don’t by law have to take it with them.
By Mishaya Chettiar, Executive Head, Everything.Insure.
BUSINESS REPORT