A no-nonsense guide to car insurance

Regular payments towards car insurance could leave you questioning the point of even having it. But would you be able to afford repairing or replacing your car in the case of an accident, theft or breakdown?


What is car insurance?

Comprehensive vehicle insurance protects you from losing money if your car is damaged or stolen. Finding an insurance policy that suits your needs requires a lot of research and some shopping around, and may require advice from an authorised Financial Services Provider.


Do I really need car insurance?

Even if you are the most cautious driver, it’s a huge financial risk to drive an uninsured vehicle – especially with South Africa’s high rate of both accidents and theft rate. If you are uninsured and have an accident, you may be solely responsible for covering the costs of repairing your car, or buying a new one.


What kind of insurance do I need?

There are a few different types of car insurance to choose from, depending on your needs and budget:

  • Comprehensive insurance – Think of this as your complete option, as comprehensive insurance policies generally provide cover for any kind of financial loss involved with your car, including accident damage, theft, hijacking, fire, explosion and even natural events like hail. It should also cover damage to the other person’s car if you cause an accident.
  • Third party, fire and theft – This will cover your car against fire damage or theft, as well as damage to the other person’s car if you cause an accident.
  • Third party only – This covers damage to the other person’s car if you cause an accident. It will not pay for your car’s damage or if your car has been damaged or stolen.
  • Total loss – Sometimes it would cost more to repair a car after an accident, hijacking or theft than it’s actually worth. This is called a total loss or a write-off. Total loss covers you for this, and it may provide limited third party cover too.

Some insurance providers offer optional additional cover, such as:

  • Shortfall insurance – This covers the difference between your insurance payout and what you still owe
  • Deposit protection – You get all or part of your original deposit refunded if your car is stolen or written off
  • Courtesy car – Use of a complimentary hire car while yours is being repaired
  • Warranty – Covers certain parts of the car against factory defaults
  • Scratch and dent cover – Covers minor repairs to paintwork

Another option to consider is a credit protection policy to cover your monthly instalments if you are retrenched, disabled, suffer a dread disease or die. There are various options available so make sure you know exactly what the policy covers before you choose it.


What factors affect insurance premiums?

The insurance company takes many factors into account that may affect your premium. These may differ from insurance company to insurance company and may include, but not limited to:

  • The type of vehicle
    Some cars cost more to repair while specific vehicles are more at risk of being stolen or hijacked. The safety offered by the vehicle could also play a role. Features like airbags may make the premium a bit higher because of the cost involved in replacing them.
  • The age of the vehicle
    An older car may cost less to replace, but it may be difficult to get parts. An older car could also be more at risk of breaking down. If you’re planning on buying a second-hand car, an AA test certificate could help you to lower your premiums.
  • The age, driving experience and driving record of the driver
    The longer you’ve had your licence, the more experience you’ve gained. For this reason, people over 25 may get a slight discount on their car insurance premiums. First-time drivers or drivers with no history driving on South African roads are likely to pay higher premiums until they have demonstrated that they are safe drivers.


What is an excess?

If the insurance company pays out a claim, there may still be an amount that you need to pay. For example, if your insurance policy’s excess is R4,000 and the repairs will cost R40,000, you need to pay your R4,000 excess to the repairer before your insurer will cover the remaining R36,000.

Some insurers allow you to negotiate the amount of your excess upfront when you are taking out insurance cover. This will also affect the cost of your premiums – a higher excess would generally mean lower premiums.


The bottom line

Never sign a policy unless you understand exactly what you’re in for. Don’t feel shy to ask an insurance company questions about their policies and make sure you do your research. While finding the right insurance policy can feel like a daunting task, it’s really worth it to know that your vehicle is safely insured and you’re not paying more than you need to. If in doubt make sure you get proper advice from an authorised insurance broker.


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