Vehicle Insurance: Annual Escalation Or A Fixed Rate?

By Author: Danny Aaron
Total Articles: 67
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It has been established that a large percentage of road users are not insured. There are quite a few reasons why someone would choose not to insure their vehicle, although financial constraint is usually one of them. Auto insurance can be very costly, and it is also a rather unfortunate fact that this amount can fluctuate every month. It is undeniable that car insurance is a necessity on our roads, especially taking into consideration the high accident and theft rates.

When you decide to acquire car insurance, there will be two options for you to consider with regards to your monthly premium payment. You can choose either an annual escalating rate, or a fixed rate. An annual escalating rate will fluctuate each year in accordance with interest rates. In addition to the increase due to the interest rates, the premium will also rise due to the normal yearly increase. There are different angles to this choice that need to be carefully considered. You need to assess which kind of option will be more affordable and viable for you. The fixed rate is a set rate that you will pay for your policy each month; this rate is not affected ...
... at all by the interest rate or any other hikes, but is therefore more expensive.

The annual escalating rate will be affected by the interest rates each year. If the interest rate goes down, your premium will also decrease, saving you money. The problem lies when the interest rate goes up. This can be an annoying extra increase that you may not be able to afford!

This is why one would consider the fixed / flat rate option. A lot of people find themselves to be a bundle of nerves when they hear about the state of the interest rates. Interest rates affect bonds, many different kinds of monthly repayments and any amount of money that you are paying off on a loan. The fixed rate is definitely a more costly option, but if you consider the fluctuation of the interest rates, then it starts to make more financial sense. There is a certain aspect of safety in choosing the fixed rate option, as at least you will know exactly what monthly fee you need to pay at the end of each month.

In hindsight, it can be said that someone who has chosen the fixed rate will have to learn to ignore the updates on lower interest rates and any money they could have saved. On the other hand, with the current economic situation crumbling around us, not relying on the lowering of the interest rates can be a good idea.
For more information on the best vehicle insurance in South Africa visit http://www.payasyoudrive.co.za.