Motor vehicle insurance has been described as a necessary evil – but necessary it is!
There are just over 11 million registered vehicles in South Africa (excluding caravans and trailers). According to statistics, the majority of these vehicles – around 60-70% are uninsured. This means that to keep you on the road, insurance is not a luxury, but a necessity.
Motorists who are opt to have insurance, often choose insurance products based on the lowest available premiums, rather than from a point of understanding the benefits and disadvantages of the products they are consider buying.
Granted, it is sometimes difficult to find insurance which matches your pocket, and which gives you the cover you need or want. For this reason, it is necessary for motorists to read their policies carefully, so as to understand all the aspects of the insurance they are planning on taking. Too often, low premiums sound good but fall short when claims are made.
A good example is an excess fee which may be payable when a claim is made. An excess is a fee you pay towards a claim for loss or damage to your car, regardless of who is to blame.
A company offering a low monthly premium, for instance, may require a substantial excess in the case of loss or damage. When this happens some people are shocked to discover that the costs of repair to a vehicle may be carried entirely, or in part, through the excess fee, with little or no money being paid-out by the insurer. In this case lower monthly premiums, will not count for much as the motorist still has to pay a big portion of the costs out of their own pocket.
Equally important, is an understanding of the terminology of used in insurance contracts. Motorists must ask for clarification of any unclear clauses before committing to a specific insurance policy.
Critical questions to ask when considering insurance are:
- What is my excess? Is there a different excess for loss and for damage?
- Is the excess a flat rate, or is it calculated as a percentage of the loss or damage?
- Besides the initial excess fee, are there any additional excess fees payable when I make a claim?
- Are there any penalties for claiming within the first six months, or in the first year? (If there are, determine exactly what these penalties are)
- What is the turnaround time for claims?
- Will I be covered if other people drive my car? (And, if you are covered, is there a difference in the coverage if the car was driven by an 18-year-old driver or a 45-year-old driver?)
- Is my car covered for resale or full retail value?
- Is this insurance comprehensive insurance?
- Are there any limitations on where or when I can drive my car?
- If something happens to my car, is car hire included in my cover while it is being repaired or replaced
Consumer education is vitally important for motorists. It is not enough to merely rely on one’s countless years of driving experience, vehicle safety features or lucky charms. By virtue of being on the road you are at great physical, mental and financial rise if you drive an uninsured car.