If you are taking out car insurance in South Africa for the first time, be sure to read this first.
In this guide, we will go through essential concepts you need to be aware of in car insurance policies or contracts.
The aim, therefore, is to help you as a new insurance buyer, to avoid mistakes that could prove costly for you in the long run. After all, next to a house, a car is the most significant financial commitment most people will make in their lives.
As South Africans, we are now taking up bank credit to purchase our vehicles more than ever. According to Wesbank, one of South Africa’s vehicle finance banks, they were financing a total of 44 922 Vehicles in 2017 January. This was an increase of 63% from the same period the year before.
We take it for granted, but many new car buyers don’t know that for the bank to finance a car for you, you are legally required to ensure that the vehicle is under “comprehensive-insurance-cover” for the duration of the finance contract.
An article on wheels24, shows that most vehicles financed are done so under the 72 months or six-year contract. So when you are calculating the monthly repayment costs of your car, be sure to add insurance costs in there too.
Below are the Car Insurance concepts that we will be taking you through:
-Importance of Good Insurance Cover
-Car Insurance Quote
-2 Types of Car Insurance Covers
-Making a Claim
Importance of Good Car Insurance Cover
Having adequate car insurance can protect you financially from unforeseen circumstances like accidents, theft, and other unfortunate car-related events.
Such events tend to happen when you least expect them to. They often require costly repairs or replacements from your pockets. As your vehicle is necessary for your daily needs, this can be an expensive period for you.
The financial impact in the case of a financed vehicle could be more. Because without cover, if your car were to be stolen or written off in an accident, you would have to pay for it even though you longer have it in your possession or cannot use it anymore.
A good insurance cover can also help you If your only vehicle is taken away for repairs. In that case, you could get a “curtesy” or hired car, that you can use for the duration of the repairs, provided you have taken that cover option of course. Therefore, you want to make sure that what you have is the best value for money cover for your unique situation.
The growing South African middle-class population means that many cars and therefore, insurance buyers will also be first-time buyers. Therefore, they would not know what to look out for when purchasing good vehicle-cover best suited to their unique circumstances.
First-time buyers are thrown into the deep end and left alone to figure out for themselves how car insurance works. Buying your first car can be overwhelming. You have a lot of emotions going around.
Therefore, it is somewhat of a surprise for us at Mabopane Online that there is still no proper guide-article to show new buyers the right way to go about buying car insurance cover. This information is important; it could save you hundreds of thousands of rands in unnecessary car insurance-related costs.
The car salesperson is not your financial advisor. They are not required to have your best financial interest at heart. They are also not allowed to offer financial advice to you.
Salespeople get paid on the number of vehicles they can sell and are therefore more interested in seeing you driving off with your car than they are with your ability to repay your loan and have your car insured.
Great as the feeling of driving off with your car is, failure to make proper insurance arrangements could leave you with an expensive mistake later on when you try to make your claim.
Car Insurance Quote
The sheer number of available insurance companies in South Africa is too many to count. So how do you know which one will offer you the best value for your hard-earned cash? The best way to choose the right one is to call as many of them as possible and compare quotes.
A quotation is a price that an Insurer is willing to charge to have you covered in a given policy. It is specific to an individual. Therefore, quotes for different individuals for the same vehicle could differ significantly depending on their circumstances.
To get a quotation, you would speak to an insurance consultant. They will typically ask you a series of questions about your driving history, driving habits, and history with insurance companies and other related problems.
They do this to create and assess your risk profile. A risk profile is a scale of measurement used to determine the likelihood of submitting an insurance claim. The assumption is that high-risk individuals are more likely to put in an insurance claim than low-risk individuals. Therefore, if you’re assessed and found to be of high risk, your monthly payment premiums will be higher.
Armed with this knowledge you could lie and get away with a low-risk assessment and therefore a lower monthly premium payment right? Wrong.
The people tasked with assessing your claims are professionals. They have a lot of experience in the insurance industry and know what they are doing. If there is a hint of untruthfulness in your quote application transcripts, they will find it. And when they do, it will be like you never had car insurance, to begin with.
So whatever you do, ensure that you respond truthfully to questions asked during the application for a quotation. Getting quotations from one insurance company to the next can be tiresome and time-consuming.
Hippo is an insurance quotation service that can save you a lot of time and hassle. They will take one assessment from you and compare it against their database of insurance companies. They will then give you your best available option from that list.
2 Types of Car Insurance Covers
The list of possible insurance covers is practically endless. But for our purpose here we will only focus on two types, Comprehensive cover, and others.
Comprehensive insurance cover, like its name suggests, is cover with the most options available. It is the most expensive cover option that an insurance house can offer you.
With this option, you can claim theft, car hijacking, accident, third party liability, hail damage, etc.
Remember that with vehicle finance, this option is compulsory.
Other Cover Options
Comprehensive Car Insurance cover has all the bells and whistles you would need in a policy. It is not necessarily what you need, though. The more cover options you include in your policy, the bigger your monthly premium will become. It is therefore essential, for saving money that you take out only options that you need.
You could choose to cover your vehicle for 1, 2, or more of these options below.
In the event of a claimable incident, you will need to make a claim. Please read your policy document section on claims carefully. It contains guidelines on what information will be required from you in the event of a claim.
The guidelines vary but normally include a police case number and other driver details in event of an accident. This is in the case of 2 or more cars involved.
Your policy book will inform you of any clauses in your cover. Some clauses could make claiming for your damages more difficult.
Knowing what your access fee is important. This is money that you will have to pay to the insurer in the event of a claim. Depending on your insurer it could be required before or after the repairs to your vehicle, in the case of accident damage.
During your request for a quotation, you might be asked if you would like to have a lower premium or a lower access fee. A higher premium means a lower access fee for you and vice versa.
Beware of certain clauses that could increase your access fee. These could include driving on an unpaved road or claiming for an accident that occurred when the car was not used by the owner(yourself). All of these should be clearly stated in your policy document.
It is not a given that your claim will be successful. The car insurer will assign a “claims assessor” to look at your application. They will be doing their investigations to make sure that everything is going according to the terms in your policy book.
If you did not break any exclusion clauses like driving under the influence of drugs and alcohol, then your claim is more likely to be successful. However, if this is not the case your claim might be rejected. You might be able to get your paid premiums back or not. Make sure to check this with your insurer.
In the case where your claim is rejected and you feel that the reasons the insurer is giving you are incorrect, you can by law, approach the South African Insurance Claims Ombudsman. This is a free third party service whose mandate is to mediate disputes between car insurance companies and policyholders.
“Our office provides an independent, objective, efficient and free service to policyholders and others in respect of their complaints arising from long-term insurance policies”. This is a statement found on the ombudsman’s website