Car insurance in South Africa can be very expensive, partly because, according to the South African Insurance Association, about 65% of road users have no motor insurance. This means that those who are insured have to pay over the odds in order to cover those who have no vehicle insurance. Reading this, you might be tempted to skip the high cost of car insurance and maybe buy yourself a new car with the money you’d save. That would be a mistake, however, since another reason why car insurance in South Africa is so expensive is because of the very high level of criminal activity and accident rate, making it likely that you’ll be needing that vehicle insurance sooner than you might think (although we hope not).
What is car insurance?
In providing you with motor insurance, a car insurance company enters into a contract with you in which they promise to cover any loss which you might experience through theft or damage to your car, whether it be to you physically, to your possessions, or to other individuals in your car. The contract for vehicle insurance sets out how much the car insurance company will pay out in any given situation, depending on a number of variables. It is important to pay attention to these variables, since they determine how much your premiums will be and under which circumstances the car insurance company can refuse to pay out.
Why get car insurance?
Without car insurance, you would have to cover all the costs of repairing or even replacing your car in the event of damage or theft, and the costs of repairs are rising every year. If you are involved in an accident and have no motor insurance, you might also have to cover legal and medical costs for everyone involved, and might face being sued for an amount that you could be unable to pay. On the other hand, if the accident was not your fault, you would have to spend your own time claiming damages from the other driver. Bearing in mind South Africa’s ever-increasing rate of hijackings, car accidents and thefts, the monthly payments for car insurance is probably money well spent after all. Just one careless driver in your path or split-second mistake could cost you far, far more than you would spend in car insurance payments throughout your driving lifetime.
Different types of car insurance
When you look for car insurance quotes, it is important to bear in mind that there are a number of different types of car insurance types, defined by many variables which all affect how much you will pay in your premiums.
The first variable is the use that you do with your car:
- Private use means using your car only for your social and recreational purposes. This includes driving from you home to your workplace.
- Professional use means that you use your car as part of your work, but it is not essential to carrying out your work, e.g. Lawyer, Doctor, Architect etc, as well as private use.
- Business use means that you can only carry out your work through using your car. It also includes private use.
Since you will be using your car far more if you also use it as part of your work, this increases the chances of you experiencing some form of car accident or damage, and so you will pay higher premiums. If you were to only pay for private use cover, but then had an accident while using it for business or professional purposes, you would find that your car insurance company would not cover you at all.
The second variable is the type of car insurance cover you want:
- Comprehensive car insurance covers the widest set of circumstances. It generally includes theft and hijacking, and all damage to your own car resulting from fire, traffic accidents, and natural disasters such as floods and hail. It also includes cover for any damage which you may cause to another car or injury resulting from an accident which you were involved in.
Most companies offer flexible extra options which can be bolted on to a basic third-party only insurance policy to provide the level of cover you desire. For example:
- Fire and Theft insurance can be added to third-party only to give you cover for theft, hijacking and fire damage as well;
- Liability to other people cover provides payment in the event of personal injury to others or damage to their property;
- Limited cover insurance combines both liability to others and fire and theft insurance, but does not include damage to your own vehicle or your own personal injury.
Value of the car insurance cover that you want:
- Retail value: the amount which you paid when you bought the car. This is the highest value, as in the event of total write-off of your car, you will receive the amount which the car cost to buy. The disadvantage to this is that every year the value of the car will go down, but unless you contact your car insurance company each year to reassess your car’s retail value, your premiums will stay the same.
- Trade value lies at the other end of the scale and is the amount which a car dealer would give you to buy your car in its pre-accident state. This is obviously less than the amount a dealer would charge if you were buying the same car from him, since it does not include the markup he would add.
- Market value is an average of retail and trade value, and is complicated to calculate since it is affected by the details of a car’s condition, mileage, service history, and more. If you want to get an idea of your car’s market value, you can look in a specialist publication such as Autodealer’s Digest. Buying car insurance for the market value of your car will get you lower motor insurance premiums, but if your car is written off you may not receive enough money to replace it.
- Specially agreed value: collectors’ and/or vintage cars are often insured for a value agreed between you and the car insurance company, based on the valuation of an approved assessor.
The type of value you choose determines how big your motor insurance quotes will be. The age, mileage and condition of your car, along with the type of value you chose, will determine the amount the car insurance company will pay out in the event of total damage to your vehicle. Make sure that you read the terms & conditions carefully so that you know what you are paying for and how much you would receive should the need arise.
What does the car insurance policy usually include?
Why you need car insurance. Credit: Patti Sapone.
Different car insurance quotes will include different motor insurance benefits. Consider them carefully and decide how important they are to you, but don’t let the extras overshadow the basic terms of the car insurance policy.
Here are some of the extras that your motor insurance quote might offer:
- Medical payments coverage, which will contribute towards your medical expenses even if you are injured in somebody else’s car, or uninsured motorist coverage, for an accident that is caused by an uninsured driver.
- Bodily damage liability and property damage liability ensure that any injury to you or damage to your vehicle is covered, regardless of the circumstances.
- You can pay for extended coverage, to cover other individuals whom you permit to drive your car.
- Some motor insurance policies include twenty-four hour emergency roadside assistance and a courtesy car while your own car is being fixed.
- 12-month guarantee on all repairs, use of only genuine replacement parts, and a promise to pay the full retail value of the car are other benefits that are sometimes offered as part of a motor insurance policy.
Car Insurance Laws
Car insurance in South Africa is regulated by the Financial Services Board and governed by statutory law. Legally, all car insurance companies must be registered, and as financial services providers they must all be licensed by the FSB and adhere to the FAIS act. If any car insurance company in South Africa is not registered, or tries to pressure you into taking a particular product, you should report them to the FSB.
Summary:
In short, car insurance is a necessary evil, but with some advance planning you can reduce your costs. Since there are so many types and kinds of car insurance, make sure that you do your homework first, to avoid being taken for a ride.
If you found this article useful, you might like to read our “5 steps to getting car insurance“.
