What is Car Insurance ?
Car insurance in its simplest form, a contract where an insurance company takes financial responsibility for any losses the insured person or business incurs through damage to their car, damage to a third party or theft. Taking responsibility for these losses means that the cost is covered by the insurer. The specific types of losses that are covered by the insurance policy are specifically defined in the policy you take out. It will differ from insurer to insurer and policy to policy.
Types of damage and loss that you can be insured against, include:
- Car collisions or road accidents
- Damage caused by stationary objects (such as walls or trees)
- Damage from fire, floods, hail or other natural disasters
- Physical injury you suffer in the event of an accident
- Damage caused to another person’s (the third party’s) car by you
- Physical injury or death caused to another person (the third party) by you
Basic Types of Car Insurance
Comprehensive Car Insurance
This is the most extensive type of car insurance you can get. Comprehensive car insurance covers you for events such as theft, hijacking, loss or damage through accidents, fire and natural disasters (such as hail or floods). It also covers you in the case of claims made by third parties, if you were responsible for the damage caused to their vehicle. Due to its extensive cover, comprehensive car insurance is also the most expensive.
Third Party, Fire, and Theft Insurance
The only difference between this type of car insurance and comprehensive car insurance, is that it does not cover you for accidental damage to your car. This still covers you for theft, hijacking, fire and damage caused to a third party, but will not cover you for your own car’s repair or replacement cost if you are in a car accident or have an accident like driving into a wall.
Third Party Only
This option is the cheapest form of car insurance in South Africa. This covers you for any damage you cause to a third party’s car, as well as any costs associated with accidental death or injury to third parties involved in the same accident. This does not cover you for any loss or damage caused to your own car, whether in an accident, theft, hijacking, fire or floods.
Which type of car insurance is best for me?
Before you compare car insurance, you should know if your car is paid off or has relatively low value, third party only cover or third party, fire, and theft insurance could be options to consider. In such cases, choosing one of these options to still cover yourself against causing damage to a third party’s vehicle is wise, as the cost of covering such damage can be large if their car is an expensive model.
It is important to keep in mind that if you do not choose comprehensive car insurance, you will have to pay any costs of damage to your own car or replacing your written off vehicle, yourself. Therefore, the lower premium you’ll pay, if you choose not go with comprehensive cover, might not be worth it if your day to day exposure to risks can be financially crippling.
Generally, comprehensive car insurance is a wise choice.
An insurance excess payment is always the first amount you have to pay in the event of any loss or damage occurring to your car and an insurance claim being submitted. This is, therefore, the uninsured portion of your loss. Any time you submit a claim with car insurance, you will have to pay the excess amount, as this is a means insurers use to deter clients from submitting minor or fraudulent claims. The amount of excess payable is agreed upon upfront, and is fixed in terms of your policy contract. This is something you will keep in mind when you compare car insurance options.
An easy example to explain this is the following:
- If the amount of excess for your car insurance is R2,000,
- and the damage to your car is R20,000,
- the insurer will cover R18,000 of the cost,
- where you pay R2,000 yourself in the form of an excess payment.
Factors that determine car insurance payment
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. 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.
- 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.
As there are various variable 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 or the prima rate rise. 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.
Is car insurance really necessary?
South Africa does not have legislation requiring car owners to take out 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 damage to 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.
What you need to get car insurance in South Africa
- Basic identity documents
- Necessary banking documents, such as three-month bank statements
- Take note that when applying for insurance, the insurer will run a credit check
- Details relating to your car, such is as make, model number and year of registration
- Information relating to the factors mentioned above, such as location, security measures and the age of registered drivers
How can funds from an insurance payout be used?
Your insurer will only pay out an amount that they deem as reasonable once the cost of damage or replacement of your vehicle has been determined. The insurer will sometimes pay the garage or mechanic directly and, therefore, you will not have access to the funds. In the case of a vehicle being written off or having to be replaced, or repairs being paid personally, the insurer will pay the reasonable amount directly to you as compensation for this loss. These funds can then be applied as you deem fit. It is not required that you buy another car with these funds, for example.
It is important to remember to first submit the quote given by your mechanic or garage to the insurer for approval before continuing with repairs, to make sure what the amount is that they will be willing to pay and that they deem to be reasonable.
Tips for choosing the best car insurance for you
- Know what you get. Before choosing an insurer, read the complete policy, make sure you understand all the terminology, terms and conditions and what is excluded from their specific cover.
- Provide accurate information. Make sure the information you provide the insurer is accurate. Your policy, premium and what you get from your insurer is based on the personal information you provide to them. If this personal information is wrong (even the slightest bit) you will not receive an accurate quote. You might end up paying an unnecessarily expensive premium and in the case of a claim, if the information was inaccurate, the insurer is not required to uphold their end of the deal. And to add fuel to a fire, they could even institute a claim against you.
- Make sure you compare quotes from all relevant insurers. Insurance providers such as Santam, Outsurance and Discovery are well known, but there are various other insurers that might be better suited for your specific needs and that can provide you with a better premium. Using the FinCheck.co.za comparative tool will enable you to properly compare all possible insurance quotes to make sure you get the best deal.
- Insurance Cash Backs. Certain insurers offer you a bonus or cash back option if you do not submit a car insurance claim for a certain period of time. Although this might be enticing, make sure you compare all the pro’s and con’s of the specific insurer to make a decision on all relevant information and factors.
For comprehensive details on all aspects of South African car insurance, be sure to check out