Travys Wilkins, chief executive guru at insurance comparison website CompareGuru, unpacks what you should know and provides some insider tips to help you choose the right cover to match your budget and needs.
According to the AA, between 60% and 70% of the cars on SA’s roads are not insured. If you do have car insurance, it means that the other involved drivers in an accident will probably not be insured.
Car insurance covers you, your vehicle, someone else driving your car and other people involved in the crash. If you cause an accident, you could leave a vulnerable victim without the medical attention needed to recover. You could also be held personally liable for third-party claims (claims by other people involved in the incident).
If you don’t have insurance and are hit by an uninsured driver, your medical care won’t be covered, and neither will the repairs to your car. One serious collision could literally bankrupt you if you consider the cost of repairs, medical expenses and possible lawsuit judgements
Nobody budgets for unexpected events like having your car stolen or vandalised. But each person’s needs differ, and these can have a substantial effect on the premium you pay. For instance, are you the only person driving your vehicle or do other people drive your vehicle? Does your insurance policy impose a premium penalty for young drivers?
Hijacking and theft cover are important given the high crime rate in South Africa, but some policies will only cover these events if an immobiliser or tracking device is installed. If your car is used for business but this is not specified, you could find yourself in trouble when you claim.
Excess is the amount that you will have to pay regardless of the amount of your claim. If your excess is R3 000, this means that the first R3 000 of any claim will come out of your pocket.
The higher your excess, the lower your premium, and vice versa. You could also opt for a percentage-based excess which is calculated as a percentage of the value of your car. Premiums are low but before you choose this option, do the calculation: a 20% excess on a car valued at R90 000 means you’ll need to be able to pay for the first R18 000 of your claim. You might get a very low premium, but the excess is extremely high.
“This is where comparing your options and getting advice from an expert becomes important,” says Wilkins. “You pay lower premiums by increasing your excess, but you need someone to work with you to weigh up your options. Compare quotes from different insurance companies and speak to one of the CompareGuru advisers to guide you.”
It goes without saying that you need to be clear on exactly what you are covered for, so get help to decode industry jargon. A common area of misunderstanding which affects your premium is vehicle valuation. “Your car insurance covers your car for three possible valuations - retail value, market value and trade value – which come at different premiums,” explains Wilkins.
Retail value cover is most expensive and means you will be paid the current value of replacing your car. Market value brings down your premium, but you may find that your car is insured for lower than its market value. Trade value is what your car would be traded for at a dealership and is often much lower than the value of your car.
Another common misconception is the understanding of comprehensive cover - it does not mean everything is covered. There are exclusions on every single policy (items and circumstances that will mean your claim is rejected) and you should know what they are. These include driving drugged or drunk, as well as more obscure exclusions like damage resulting from hail or a tree falling on your car.
There are also certain costs generally excluded from standard car insurance policies which create a shortfall that you will need to pay. Some of these are tyre and rim damage, the repair of minor scratches and dents and mechanical failures if your car is out of warranty. Gap cover for car insurance comes in the form of value added products that ensure you are covered for these exclusions at a small extra cost.