Everything you need to know about car insurance

Charné is a Registered Tax Practitioner and  has written several magazine articles with financial related themes since 2006. She is a known finance and tax expert working as an adviser at lemons into lemonade financial planners cc.

Car insurance is available for motor vehicles, motorcycles, light delivery vehicle, caravans and trailers. If the car is used for emergency services (like alarm company cars), then it is usually necessary to get specific business policies for them.

There are three types of insurance for your car:

•    Comprehensive cover
•    Third party, fire and theft cover
•    Third party cover

Let’s take a closer look at each type of cover.

Comprehensive cover:

This type of cover is compulsory if your car is still financed. It is more expensive but it’s the best insurance you can get, even if your car is fully paid. “Comprehensive insurance” means that the following is covered:
•    The damages to your own car when you were in an accident (excluding your excess, which is a payment that you must make when you have a claim).
•    Full or part of the damages to any other car(s) that were directly involved in your accident which we call “Third party cover”.
•    Fire that damages or destroys your car.
•    The theft and/or hijacking of your car (some policies do not cover this in full or with higher excess payments that you have to make, so check your policy document).

Third party, fire and theft cover:

With this cover, you are not covered for damages to your own car so, it is definitely cheaper to have only this insurance but you may not be able to replace your car if the car is written off in an accident. If you have this cover and you are the wrong party in an accident, it is 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.

Third party cover:

This is the cover that is the cheapest and will only provide cover for other cars, as described in the previous paragraph.

What is normally not covered on car insurance:

Normal wear-and-tear on a car and services are not covered by car insurance. It is also important that you read your policy schedule so that you know of any types of cover that may be specifically excluded on your policy. Like with most insurance, your car is not covered for intentional damage. 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 that confirms you have cover on the car. This certificate is to be presented at the border.

What value to use when you insure your car:

When you insure your car, most of the insurance companies will use the computer system to determine the current value of your car. That is why they need to know exactly what car you have like it’s model number, what year it was manufactured and if you made any modifications to the car.

You can either insure your car for its retail value or market value. The retail value is the better option. Or, you can save on your premium and only insure it for its trade-in value which is a lower value that dealerships normally pay out when you sell the car to them or trade it in for a new one.

If you have made extensive modifications to the your car or you have an old vintage car that you want to insure, the insurance company will ask you to send in a written valuation of the value.

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GIF: Giphy

How the premium on your car insurance is determined:

The use of the car is important when the premium is calculated. For example, if the car is used for deliveries, then it will increase the risk on the car and the premium may be higher. Trips to and from your work counts as personal use. When you visit clients during the day, it will be considered either full or partial business use, depending on your type of work and amount of visits you make to clients or suppliers every day.

Apart from the use of the car, your premium will also be influenced by, for example:
•    the value of the vehicle;
•    the colour of the vehicle (white cars and cars with bright colours like yellow are normally cheaper);
•    who drives the car (with some companies insurance on women is cheaper);
•    how old the driver is (young drivers usually pay more because they tend to be more inexperienced and/or irresponsible on the road) or how long the driver has a license;
•    where the car is parked in the day or night (how safe or risky the address is where it is parked, whether it is out in the open or locked up in a garage);
•    previous claims you had (which you have to be very honest about); and
•    the excess you choose (this is the amount that you will be responsible for if you have a claim).

Other options you have when you take out car insurance:

If you choose a higher excess, you will pay a lower premium. Just make sure if you choose a higher excess to save money, that you do have emergency funds available to pay the excess if your car was in an accident. Some companies offer you a chance not to have any excess but of course, at a higher premium.

You have the option to add “Car Hire” as an extra benefit to your policy which will increase your premium. If your car was in an accident longer than a certain period, you will be able to hire a car for a certain period at no cost to yourself.

Most of the insurance companies will only provide cover on the car if the person driving the car was specified on the policy as the regular driver. Make sure what your policy says before you let anyone else drive your car. Some companies allow you to add other drivers, like your husband or boyfriend. Some companies do not list specific names of drivers but they may charge you an extra excess if the car was driven by anyone else. In any instance, the other driver of your car must either...
•    have a valid driver’s license; or
•    or a learner’s license and be accompanied by someone with a valid driver’s license.

Additional requirements when you take out car insurance:

To limit fraudulent and dishonest claims, insurance companies will ask you to prove the existence of the car. They can do this by requesting the car’s registration number, engine number and VIN number (which you can obtain from the license details). Some insurers also ask you to take the car in to an inspection center around the country so they check that the car has not already been in an accident by the time you take out insurance and that it has the modifications or accessories like radios that you confirmed it has. Some insurance companies will request you to install an immobiliser, especially if your car does not come out with a factory fitted immobiliser.

Extra benefits of having car insurance:

Most of the insurance companies offer free access to a road assistance programme. For example, they come out once or twice a year if you’re stuck on the side of the road and they may even pay reasonable costs for towing the car to the nearest repair shop if it cannot drive. On some policies, you can also add funeral or accident life cover.

What you do if you’re in an accident

Here are 4 things to remember if you were in an accident:

1.    When you are in an accident, it is important to stay calm, don’t talk too much and only exchange personal and insurance information with the drivers of the other cars.
2.    It is also important to report the accident to the police immediately and obtain a case number that the insurance company will require when you lodge your claim.
3.    If anyone got hurt in the accident (or if you think anyone got hurt), then everybody who is part of the accident remains at the accident scene. Report it to the police and they will come out to you to give you a case number.
4.    Keep a copy of your insurance schedule with your policy number and the company’s contact details on your phone and in your car at all times. If you are in an accident, call the emergency roadside, your broker or the insurance company’s call centre for further guidance.

Always remember to contact your broker or insurance company if you change cars or if the address changes where the car is parked in the day or night like when you move or change jobs.

This article provides general guidelines and does not contain specific advice.

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