By H&H Admin
Car insurance covers you, your vehicle, someone else driving your car and other people involved in a crash. Yet, according to the AA, between 60% and 70% of the cars on SA’s roads are not insured, meaning that it is highly probable that most of the cars around you are uninsured.
In the event you cause an accident, being uninsured means you could leave a vulnerable victim without the medical attention they need to recover. Also, you could be held personally liable for third-party claims (claims by other people involved in the incident).
One serious collision could literally bankrupt you if you consider the cost of repairs, medical expenses and possible lawsuit judgements.
What Is Covered?
Hijacking and theft cover are important given the high crime rate in South Africa and it is important that motorists budget for unexpected incidents such as a car being stolen or vandalised.
Some policies only cover these events if certain considerations have been met such as the installation of an immobiliser or tracking device, where your car is stored overnight and if your car is used for business or personal purposes, to mention a few.
Of course, each motorists’ needs differ and these differences can have a substantial effect on the premium you pay and therefore the type of cover you receive. For instance, are you the only person driving your vehicle or do other people drive it as well? Does your insurance policy impose a premium penalty for young drivers?
It is critical that you are honest about your needs so that you are adequately covered.
The Trouble With Excess
Excess is the amount that you 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 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 pay for the first R18 000 of your claim. You might get a very low premium, but the excess would be extremely high.
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.
- Retail value cover is the 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 in 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 these are.
These usually include driving under the influence of drugs or alcohol, as well as more obscure exclusions such as 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, dents and mechanical failure if your car is out of warranty.
It is recommended that you include gap cover for car insurance. Gap cover comes in the form of value-added products that ensure you are covered for these exclusions at a small but extra cost.
No doubt, buying a car is a high-ticket item and as more and more South Africans feel the economic pinch, it may be tempting to reconsider whether the substantial extra monthly expense of insuring your car is worthwhile. We hope the above information dissuades anyone who may be entertaining thoughts of cancelling their car insurance in the hopes of saving a little money. It’s simply not worth it.
Source: Travys Wilkins, Chief Executive Guru, CompareGuru