How Car Insurance Works

Car insurance can be confusing for many vehicle owners – what with the different types of cover available, how the premiums are determined, and what happens when it comes to paying out.

The Road Accident Fund (RAF) does cover injuries to the persons involved in an accident but does not cover damage to the vehicles. A driver who is not covered by car insurance is liable for damages incurred caused by the accident.

To understand how car insurance works in South Africa, it helps to know about the different types of cover available. The three main types are:

  1. Third-party only
  2. Third-party, fire & theft
  3. Comprehensive

Third-Party Insurance

The most basic and least expensive option, third party insurance only covers accident damage done to the property of another individual, and costs of injury or death to the third party passengers or individuals involved in the accident caused by you as the driver. For example, if you cause an accident by hitting another vehicle, your insurance will cover the cost of vehicle repairs and medical bills of the other person (the third party).

Third-Party, Fire and Theft Cover

This option is one level up from third party insurance, offering you all the same benefits, but also covers your car against fire damage and theft. However, it does not cover your car for damages in the event of an accident.

Comprehensive Car Insurance

As the name suggests, this type of car insurance is the most extensive and covers you for all the above – third party, fire, and theft – as well as road accident damage, weather damage, and hijacking.

How Car Insurance Premiums are Calculated

Whether applying for vehicle insurance for a new or used car, there are several aspects insurers consider in an assessment to determine your monthly premiums. The main factors are:

  1. Insurance history – The longer you have uninterrupted cover for the period of vehicle ownership, the better standing you will have with insurance companies, and the more favourable your premiums will be. Therefore, ensure that you are covered for every new replacement vehicle you purchase from the onset. Any lapse in coverage can influence an increase in premiums.
  2. Driving record – Insurance companies will see you in good light the longer you have not been involved in a vehicle accident caused by your own negligent driving. Accidents and accident claims on your record will cause increased rates on your premium.
  3. Residence and parked location – Where you park your car at night is an important factor when determining your premiums. The best chance of a lower premium here is to live in a safe area and to park your car in a locked garage. Another consideration is that densely populated areas mean there is a higher chance of being involved in a car accident, thereby pushing up the premium rate. 
  4. Road travel time – The more time you spend driving on the road, the higher your chances of you being in an accident – thus, you can expect to pay higher premiums based on this.
  5. Make and model – Generally, vehicles with a higher price point cost more to insure. For example, if you drive a luxury sports car, you will pay more for parts and repairs than a lower-end hatchback, hence insurance premiums will be higher to cover those costs. Safety is also an important factor – cars with a good safety rating will lower the insurance premium.

When Your Car is a Write-Off

If your car is in an accident and the cost to repair the damage is more than the car’s market value, then your car is considered a write-off. In this event, the insurance company will keep the car and pay you the market value. Note though there will be a policy excess to pay.

What is Insurance Excess?

Excess comes in two forms, compulsory and voluntary. Compulsory excess is non-negotiable and set by your insurer, however, you can choose to pay a further excess to help bring down your monthly premiums. 

The voluntary excess amount is an agreed amount you as the insured pay when claiming. This initial payment is first made by you as the insured for repairs to be done before your insurance company makes their contribution.

For example, if the damages to your car amount to R65,000 and your excess is R10,000, the insurer will pay out the remainder which is R55,000.

How to Claim from Insurance

If you’re involved in an accident, contact your insurer as soon as possible and provide all the relevant details: time, location, the third party’s name, insurance provider, license number, ID number, vehicle make and model, and all the contact details.

Apart from offering quality used cars in South Africa with dealers countrywide, Auto Pedigree strives to serve our customers with superior service. Let us help you find the right insurance package – contact us for a free insurance quote.

Disclaimer: This information is for educational, or entertainment purposes only. We do not make any warranties about the completeness, reliability, and accuracy of this information.