Car Insurance and Why You Need It

Believe it or not! According to the South African Insurance Association (SAIA), around 65% of the cars on our roads today are not insured. Who knows, perhaps these car owners think they don’t need it. If you consider the at-least 60,000 people involved in serious motor car accidents (not counting those little prangs and bumper bashings we witness every day) and the 100,000 car hijacks and car thefts (not counting smash-and-grab type incidents) in South Africa every year, being without car insurance is pure folly.

Being uncovered

If you are one of the 65% have-nots, you run an enormous risk – regardless of whether you drive a shiny new sports car or a careworn jalopy. The only difference will be the size of the bill.

If you are involved in a crash, and deemed to be the guilty party, not only will you have to find the money to cover the expenses for repairs on your car, but also that of the other party’s vehicle or other parties’ vehicles. You may also have to make good the damage caused to property, and perhaps even pay compensation for injuries sustained.

The situation could even be worse: Let’s say you used your home loan facility to purchase your car. If this car happens to get written off while you are busy repaying the debt, you have no choice but to continue paying – up to the very last cent. While all this is happening, you will still need to find the money to pay for a new set of wheels to replace the ones you have lost.

Theft, break-ins, hijacks, and smash-and-grab incidents produce a similar result. If you have no car insurance, you will have to make good all the damages you suffered, at your own expense.

Getting covered

To become one of the 35% haves, you will need to contract with a motor vehicle insurance company and then pay your premium regularly. The premiums are calculated in reference to the amount of insurance on the car.

This could be one of three values:

  • Retail Value, which is the buying price from the retail dealer to the consumer;
  • Trade Value, which refers to the value offer you would receive if you trade in the car for another vehicle; and,
  • Market Value, which is the average of the two values cited above.

It will be entirely up to you to choose which value should be used. This decision will probably be influenced by how big a premium you can afford to pay.

Once you have chosen the amount of protection you want, the car insurance company will determine the premium. Many factors are considered over and above the value of your car. These include the age of the driver (young drivers have higher risk of being involved in an accident); gender (generally, female drivers have lower risk); security devices fitted to your car; the general area where you park the vehicle overnight; the overall security of the overnight parking place and whether you have a propensity to claim or not.

Naturally, every one of the questions that relate to a risk will have a direct bearing on your car insurance premium; it is thus very understandable that a car owner may be tempted to withhold or alter information in the hope of lowering the premium.

This may not always be in your best interest. You could find yourself at the losing end of the bargain if you take this route. What you should really try to achieve is the best balance between a full disclosure of your circumstances and the right amount of cover.