Fincheck recently launched a fresh vehicle insurance comparison page to help South Africans make better financial decisions when it comes to choosing a vehicle insurance partner. To help you make the most of your choice, we're going to talk about vehicle insurance and help you understand the vitals of this lifestyle product.
In this second post, we ask whether vehicle (or car) insurance is really necessary and also the factors influencing the cost.
Remember, if you're considering vehicle insurance, we can help you responsibly compare options on our vehicle insurance apply & compare page!
Is vehicle insurance really necessary?
South Africa does not have legislation requiring car owners to take out car insurance. Therefore, it is not compulsory. It is, however, advisable. Even though the monthly premium could be a burden at times and you would want to spend the money elsewhere, there is always a risk that your car could be damaged, stolen or hijacked or damaged by a third party.
If this happens and you do not have car insurance, you will be liable to cover all the costs from your own pocket. These costs are usually large and can be financially devastating. Therefore, it is a wise choice to choose the right insurance that fits into your monthly budget, but that also covers you for all unforeseen events.
Factors that determine vehicle insurance payments
The level of risk you pose to an insurer will largely determine how high the premium is that you pay. The value of your car and, consequently, the size of the cost to repair damage / replace the car will also play a significant role. There are some others factors to keep in mind when you compare car insurance options. Various factors include:
Location
Higher risk areas will pay a higher premium. Security measures. If your car is protected by security measures such as electric fencing and a garage, it will naturally decrease the premium.
Age and experience
With some insurance providers, registered drivers under the age of 25 are deemed more likely to have accidents than older and more experienced drivers. Therefore, they pay a higher premium or excess.
Claims history
The less you claim and have claimed in the past, the less you will pay on your monthly premium. Usually, once you submit a claim your premium will increase. This usually excludes claims related to fixing cracks in your vehicle windows due to stones or road debris hitting them.
The age, value and condition of the car
The make and model of the car being insured, the age and condition that it is in and the replacement value will all influence the premium you pay, as these influence the size of the costs that would have to be covered in case of an accident.
The amount of excess
If you choose to pay a higher excess, it can be an easy way to lower your monthly premium.
Inflation
Inflation is taken into account when determining the replacement value of your car or the possible cost of damage. Therefore, as inflation rises, your premium could rise.
VAT
In South Africa, the recent increase in VAT will impact an increase on your vehicle insurance cost irrespective of your actions.
As there are many factors that influence your premium, the amount of premium you pay will not always be fixed from month to month. Your premium can decrease as the value of your car decreases, but the premium can also rise if inflation, VAT or the prime rate rises. It is important to note that insurers do not always notify you beforehand of these increases or the possibility of a decrease in your premium. It is, therefore, important to be in contact with your insurer regularly in this regard.
We know the options for vehicle insurance is vast and each person’s situation is different. So, we want to help you make the right choice. If you are looking for a vehicle insurance partner, we encourage you to make use of our vehicle insurance comparison page to apply & then compare the different partners and their basic options.
To your better financial future!
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