Vehicles are an important asset, they are at the centre of your career and business growth. Take the time to figure out which car insurance policy will protect this important asset.
Car insurance can be hard to understand, especially if it's your first time getting it. But even if you have had it for a few years, you may need a refresher just so that you can re-evaluate your current insurance and negotiate better terms.
When you consider your insurance options, here's what you should be aware of regarding car insurance.
What is car insurance?
Car insurance provides protection should you or any other listed driver be involved in an accident or collision that ends with damage, injury, or death. Car insurance will also cover third-party costs if you were the cause of the accident. It may also include repairs or reimbursement for written-off or stolen vehicles.
Car insurance doesn't cover wear and tear or services. It also doesn't cover intentional damage. If you plan to travel out of South Africa with your vehicle, make that known to your insurance provider, and they will give you a certificate you can present at the border.
Car insurance can cover motor vehicles, motorcycles, light delivery vehicles, caravans, and trailers.
What happens if you are not insured
Currently, it is legal to drive a car without any insurance; just not very smart. Think about all the accidents that happen, natural disasters taking place, car theft (88 000 incidents) and car-jackings (99 000 incidents) that occur yearly. Additionally, many South Africans are now more aware of the risks of civil unrest to their property, for a good reason. Over the past seven years, South Africa has averaged 2.26 protests a day, most of them peaceful, but those that aren't peaceful can be damaging to private property.
Here's what happens if you don't have car insurance;
- If you are uninsured and are in an accident due to an insured driver, you can claim from their insurer.
- If you are uninsured and are in an accident due to an uninsured driver, you would have to take action against the driver for compensation.
- If you are uninsured and cause an accident, then everyone in the car you hit can claim compensation from you and potentially go after your assets. That includes your savings, part of your pay, or any assets you hold. Their compensation will depend on the damage you caused.
Most people believe they can save money by not buying car insurance, but that is terribly short-sighted. If you don't have car insurance, you put any income, asset or wealth that you have acquired in jeopardy with a single incident. Additionally, after being involved in an accident while uninsured, you will be listed as a high-risk person by insurers. The listing will raise your premiums.
Types of car insurance
There are three types of insurance in the market: comprehensive, third-party with fire and theft, and lastly, third-party. Coverage and costs vary significantly for each type, so make sure you understand what you are buying.
Comprehensive cover is the most expensive type of car insurance because it is the best. Finance institutions make it mandatory as part of a car loan, so you will need it if you're still paying off your car loan. It covers
- Damage to your car if it is in an accident (minus the excess). Coverage is vital when you consider that 70 per cent of vehicles don't have insurance.
- Damages to other cars involved in the accident, in whole or part.
- Damage caused by fire
- Hijacking or theft of your car.
If your car is high-end, essential to your lifestyle or work, then you should consider comprehensive car insurance. There is no guarantee that the other party is insured or has sufficient coverage to cover your costs, so it's better to play it safe and have coverage that can quickly make you whole.
The third-party fire and theft cover doesn't cover damages to your car in an accident. It would pay out to others involved in the accident if you were in the wrong. Your vehicle only has coverage for fire damage, theft or high jacking. It is more affordable than comprehensive insurance.
Third-party cover is the most affordable car insurance type. Your car has no protection. It only covers damages for vehicles involved in an accident for which you are responsible. It is usually ideal for those who have low-value cars since the premiums won't justify the costs.
Which cover works best for you depends on the vehicle, your circumstances, and potential risks. You can speak with your insurer to get advice on what will work well for you.
Car insurance terms
Within the car insurance embarked upon, you will come across several terms. Understanding them will enable you to negotiate and make smarter decisions regarding your coverage.
An excess is an amount of money you will agree with the insurer to pay out of your own pocket at each claim being settled. You usually pay the excess to the repairing company after they have finished the job and before you can drive off with your car.
You pay the excess no matter who caused the damage. It's a mechanism that insurers use to prevent customers from submitting minor or fraudulent claims. By reducing the risk of minor or fraudulent claims, insurers can then afford to lower your premium. So, the higher the excess, the lower your monthly premiums; similarly, the lower your excess, the higher your monthly premiums.
Insurers are primarily interested in the regular driver (that would be you), but they will be interested in listed drivers as well. Listed drivers, also referred to as named or nominated drivers, are any other drivers that drive the car the most after you; these could be your wife, business partner or professional driver. You must provide coverage for anyone with constant access to your vehicle should anything go wrong.
What affects your car insurance
To determine your insurance premiums, insurers use several factors. They start with how you will use the car. In general, personal use has lower premiums than business use. Insurers consider trips to work as personal use, but if you use the car to visit clients, then it will be either partial or full business use. The other factors that affect your premium include:
- Value of the vehicle.
- Colour of the vehicle. White and bright colours are usually cheaper.
- Who will be driving the vehicle; for example, there is insurance that is cheaper for women.
- Age of the driver. The older the driver, the cheaper the premiums are; the assumption is that older drivers have more experience and better temperament on the road.
- How long the driver has had a licence.
- Location for day and night parking. It's about the area's safety and whether the car will be in a garage or out in the open.
- Your previous claims.
- The excess you choose.
How insurers determine the value of your cover
When you apply for car insurance, the provider will ask you for the year and model of your car so that they can look up the value of your vehicle. At this point, it's essential to inform the insurer if you made any modifications to the car so that they can value it correctly.
The provider will also ask that you provide the car's registration number, engine number and VIN; the procedure is to reduce fraudulent claims. You may also be required to take your vehicle through to an inspection centre to ensure that it hasn't been involved in an accident before and that it has the modifications you have mentioned. You may also be requested to install an immobiliser if you don't already have one.
Once they have a value for your car, the insurer will give you the option of insuring it at retail, trade-in or market value. Retail value takes into account the depreciation of the vehicle. The trade-in value is the amount the car dealership is willing to offer you if you sell it back to them or trade in for a new one. Market value is the value of a brand new car. Although the other options reduce your premiums, it's best to insure your vehicle at market value; that way, you can easily replace it.
Car insurance providers can add value to your coverage by adding free or discounted perks. PPS offers value-added services with its car and home insurance products that include:
- A panic button that you can activate from anywhere at any time linking you to the closest security organisation.
- A 24/7 service for towing, jump-starting, tyre changing, and fuel delivery if you are ever in a jam.
- Easy licence renewal from an app along with discounts when you use it to pay fines.
- Chauffeur services for when you can’t use your own vehicle.
Profit-Share and Profit-Share Booster
PPS is a unique short-term insurance provider because it caters exclusively to graduates. It is mutually owned, so all the profits that it makes get paid to its policyholders. That means you can leverage your personal lines, car and home policies to add to your wealth. The Profit-Share Booster programme allows you to get more profit allocations from your short-term insurance policies.
Participating in the Profit-Share programme does not require any additional administrative steps or paperwork; you only have to hold the policy. How much or how often you claim will not affect your profit allocation.