Will I Save If I Buy Car And Household Insurance From The Same Company?

You could be one of the many South Africans who tend to forget about revaluing their homeowners insurance from time to time. Remembering to attend to household insurance, however, is a little easier especially when you buy car and household insurance from the same company and it is combined with insurance for vehicle and movable property.

The idea of buying car and household insurance from the same insurance company certainly offers convenience. You do not have to deal with different insurers; you only have to do business with a single company for your car and household insurance needs. But will doing so save you money?

In general, insurance companies would highly recommend that you take out car and household contents using a single insurance policy instead of purchasing them separately. In fact, you might even find it even better to consider lumping together the insurance for your house, contents, and vehicle in one policy. One of the benefits of placing all of your insurance needs with only one insurer is that your premiums generally turn out cheaper and you save money. How would you like that?

If you take out a stand-alone insurance policy for your car, the greater likelihood is that it will cost you much more than if you combined it with your household insurance. This makes good economic sense to the insurer because:

1. Having all the “goods” in one policy basket spreads, and thus reduces, the risk exposure of the insurance company. While the risk of loss for household contents always exists, you will most likely agree that the risk of loss of a motor vehicle is greater than for household contents. You drive your car every day, thereby exposing it to dangers and uncertainty of various sorts – keep in mind that there are at least a million car accidents in South Africa per year. But when you include the two risks in one policy, the bigger risk on the vehicle is counterweighted by the smaller risk on household contents. The overall (average) risk to the insurer is thus lower. This benefit is then reflected in your insurance premium.

2. The business of insurance has one principle: claims made during the year by a few are paid for by the contributions of premiums coming from the many. The prudent insurance company executive must see to it that enough premiums are in the coffers to pay potential claims. Every single risk needs to be assessed according to the likelihood of a claim being made.

For these reasons, not to mention the savings in costs to administer only one policy instead of several, it is easy to understand the reason behind the preference of the insurer not to insure a car alone. And as you may have also noticed, most companies in South Africa that sell car insurance also offer household and personal liability insurance. Because the risks are spread over a broader base, those who decide to buy car and household insurance from the same company will get to enjoy substantial savings on their insurance premiums.

It is good policy to shop around among the many insurance companies to find the most favourable combination insurance premiums before you decide to purchase your insurance cover. This way, you will have a better way of comparing the scope of cover with competitiveness of insurance costs.

It does not hurt to ask family, friends and colleagues who have made similar decisions to combine their car and household contents insurance cover, and find out what has worked for them. You can also try to compare insurance quotes from online sources to get a good perspective on the overall level of insurance rates.