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Why Do You Need Car Insurance? (Part One)

Why do we need car insurance? In part one and two of this guide, we’ll help you understand how this insurance works and why it’s necessary.

Having car insurance in South Africa is no longer considered a luxury. It’s a necessity. To many people it is already an essential component to owning and operating a car. You get the car serviced, you put petrol in to keep it going, you look after it and you pay your insurance. 

Some people get insured the moment they buy their car. Why? Because if you’ve spent any time on South African roads, you know that the worst can happen at any moment. Somewhere down the N1 highway, you’re going to run into somebody whose car is held together with duct tape and cable ties, and they have no idea what they’re doing. You can compare car insurance quotes online to find the best deal.

Before we even get into the outrageous crime or road accident stats in this country, let’s take a look at one of the most obvious reasons why you need some form of insurance on your vehicle. The AA (Automobile Association) releases annual statistics showing that 65% - 70% of the 11.4 million registered cars in the country are not insured. That’s roughly 7.9 million possible ways for you to get smashed into at an intersection by somebody playing with their phone, and leaving you to foot the bill. 

Your odds aren’t looking good, and sooner or later, it might be you. 

<insert maniacal laughter here> 

So! Car insurance can be complicated, but it doesn't need to be. In this article, we’ll attempt to put together the ultimate guide to understanding car insurance. What it is, why people tend to avoid it, how it works and why you really need it.  

Excess – Understanding Why You Pay It

The Types of Car Insurance

Car insurance is available for motor vehicles, motorcycles, light delivery vehicle, caravans and trailers. 

You’ll hear a lot of words you might not understand, such as Excess. An Excess payment is basically a contribution that you’ll have to pay when making a claim on your policy. Which means, if something were to happen and the incident is covered by your insurance company, you make a claim, you pay the excess amount owed and they pay the rest. 

Car insurance doesn’t cover normal wear-and-tear or car services. As with most insurance, your car won’t be covered for intentional damage either. 

It is also important that you read your policy schedule. You need to know of any types of cover that may be specifically excluded on your policy. Make sure that your car is covered outside of South Africa when you leave the country, in which case you need to request a certificate from your broker or insurance company. This certificate confirms that you have cover on the car, and must be presented at the border. 

You get three types of insurance for your car:

1. Comprehensive Cover

If your car is still financed, this type of cover is compulsory. It’s more expensive, but it’s the best insurance you could possibly get. 

Even if your car is fully paid up, it’s worth keeping. Comprehensive insurance covers the following: 

  • The damages to your own car if you’re involved in an accident (this excludes your excess payment); 
  • Full or part of the damages to any other car(s) that were directly involved in your accident (this is included in Third Party Cover); 
  • Fire that damages or destroys your car; 
  • The theft and/or hijacking of your car.

2. Third Party Cover

This is usually the cheapest option. Third Party Cover, however, will only provide cover for other cars, as described above. In many countries, Third Party car insurance is a legal requirement. This isn’t the case in South Africa, but it probably should be.

3. Third Party, Fire & Theft

With this type of cover, you’re not covered for any damages to your own car either, and you won’t be able to replace it if it’s completely written off in an accident. If you were in the wrong, it’s likely that the other car will - even if they have their own insurance - claim against your policy.

You are also covered for fire that damages or destroys your car and the theft and/or hijacking of your car. 

It’s important to note that some policies do not cover this in full, or with higher excess payments that you’ll have to make. Therefore, it’s important to check your policy document.

Car Insurance Need-To-Knows

Many people feel that car insurance is a blatant scam, and they consider it a bit of a grudge purchase. This is entirely understandable. A lot of people pay their insurance for years and years and never claim. Then, one day something unfortunate happens and you give the company a call. Suddenly, you realise that those policy documents are full of limitations. You feel swindled, betrayed even. 

We get it, those documents are long and dull and a lot of people don’t read them properly, but the trick with any insurance is to know what you are and aren’t covered for.

Of course, this is easier said than done. So, while you’re looking for car insurance quotes, these are some of the most important things to keep in mind:

1. What Is Covered – The Driver or the Car?

It’s important to note that you and your vehicle are covered under your policy. This means that if somebody else has an accident while driving your car, even if they have their own insurance – you’re still responsible. 

You’ll then need to submit a claim to your own insurance company. In this case, you might have to pay additional excess payments, especially if the person involved in the accident isn’t the regular driver, or your spouse.

2. What Do You Use The Vehicle For?

Regardless of the type of cover you go for, the insurance company will want to know what you’re doing with the vehicle. Are you using it for full business or just commute to work and back every day? Is your place of work in one location or does it vary? Is it for private use or carpooling? 

These things all have an effect on how insurance companies insure you, and if you’re not completely honest about this, there’s a chance your claim won’t be paid out.

3. Does Your Vehicle Affect Your Premium?

According to data collected by Ctrack, the VW Polo Vivo is the most hijacked car in South Africa. 

Vehicles that are worth more, as well as those that are higher targets for theft, are going to increase your insurance premiums, simply because they are a higher risk.

4. Is Your Excess Always The Same?

Most insurance companies have a standard excess rate that you’ll need to pay. However, some additional excess costs might come into effect when certain conditions are met. These could include the time of day, the date or the location. 

Additional excess might apply if you have an accident late at night or in the early hours of the morning. If you make a claim within the first six months to a year within taking out the policy, you may also be liable for a higher excess. If your car is stolen or you’re involved in an accident outside of South Africa or in a high-risk area, this could also push the payment up.

5. Things Your Insurer Needs To Know

Certain major life events have an impact on your monthly premiums. It’s important to notify your insurer of these events as soon as they happen, as they could also affect your claims. 

If you’ve just gotten married, your monthly premiums might go down. This is because insurance companies generally see married people as a lower risk. If you’ve just gotten a new job, the insurer will need to be updated. They need to know where your car is parked for most of the day. Likewise, if you’ve just moved to a new address, keeping the insurer in the loop needs to be at the top of your to-do list. If you haven’t updated them and something happens to your car at the new address, your claim may be rejected. 

These small details will help you get the most of your insurance, but in the end, the best way to understand everything about your cover is to read your policy documents. As soon as you get them, speak to your broker or insurer if you’re uncertain about anything.   

Continued in Part Two – Why people shy away from getting car insurance, and why you really shouldn’t.

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