Insurance and Used Cars: How does it all work?

Insurance. You may think you don’t need it, but when it comes to your car, you really do. Vehicle insurance is a sticky topic, especially for cash-strapped South Africans already trying to pay monthly instalments on their cars. Insuring your used car is the same as insuring a brand-new one. Or is it?

From fully insuring your used car to taking out basic cover for accidents, injury and property damage, car insurance is important. In this article, we briefly explore the ins and outs of insurance for your used car. We’ll unpack the types of insurance available for pre-owned vehicle insurance, the benefits of having insurance and how to get the used car insurance process started. We also look at options similar to insurance for used cars and compare the need for insurance for pre-owned vehicles to having insurance for new ones.

Insurance and your car: Why we need it

In some countries, insuring your car is mandatory. But in South Africa, insurance is a choice. Since many South Africans cannot afford to own a vehicle, let alone take out insurance for them, many cars are uninsured, leaving drivers exposed. This article will help you understand how insurance and the law work in SA.

Insurance allows us to replace a written-off car with a new one, repair damages that can often cost too much for us to afford, handle any medical expenses from being involved in an accident, and pay for damages to other people’s cars.

Every month, you pay premiums to an insurance company to provide protection for you and to insure your second-had car. If something happens to you or your vehicle, they will either pay you a cash amount to fix it, pay for the repairs themselves or replace the car (if it’s a write-off).

Insurance for used cars vs. new cars

Many people wonder if it is worth insuring your used car since it has already depreciated in value. Most of us will be more willing to insure a new car over an old one because it’s, well, brand new, and we’d hate for anything to happen to it. But don’t we value used cars just as much? Of course we do, and insuring your used car, no matter if it’s new or old, is always a good idea.

New models aren’t always worth more than used ones

It's easy to assume that paying to insure your second-had car will cost less every month than insuring a new one. While this is generally the case, since it’ll cost the insurer more to replace a new car of equal value than an older model, it isn’t always so. Older used car models may no longer be manufactured, and replacing big parts or repairing accident damage may be more difficult and thus more expensive.

Covering your assets – new and old

Cars are cars, no matter how many different people have owned them before you. Insurance companies don’t necessarily discriminate between new and pre-owned cars, so you’re unlikely to save on your premiums just because you’re not the first owner of your vehicle.

Premiums are based on drivers, location and more - not just cars

Much of the risk that insurance companies cover comes from the driver, not only the car they’re driving. Age, driving experience, how often you’re on the road, where you park, and many other personal factors contribute to the bulk of your insurance premiums.

That is why a fifty-year-old woman who works remotely will pay substantially less than a 21-year-old student who drives across town to campus every day, even though they drive exactly the same pre-owned models. Click here for more on vehicle insurance premiums.

Benefits of insurance for your used car

There are many reasons to take out used car insurance. Aside from the fact that some banks and financial institutions will require it before financing your vehicle, having insurance can help you out of an impossible situation when you need assistance the most.

Here are some of the most important benefits of having pre-owned vehicle insurance.

  • Insurance can replace your pre-owned car if written off

If your used car cannot be repaired after an accident, some types of insurance will buy you a new one as a replacement. They will usually take the market value of your vehicle and provide you with a replacement of equal value.

  • Financial lifeline

Losing your used car or being on the line for expensive damages to someone else’s can leave you broke or in trouble with the law. Insurance can rescue you from impossible financial situations.

  • Cover beyond your pre-owned vehicle

Insurance isn’t just for cars. It can be used to cover medical expenses, provide benefits like towing services or safety escorts and even help you out in an emergency by providing a courtesy vehicle.

  • Peace of mind

Arguably the biggest benefit of insuring your used car is the peace of mind that comes with knowing you’ll be taken care of if something bad happens while you’re driving.

Steps for getting your used car insured

Getting your car insured is quick and easy. The pre-owned vehicle insurance process is almost identical to getting a brand-new car insured, just with a few extra documents (like previous ownership record and a roadworthy certificate) required. Many insurance providers allow people to purchase vehicle insurance products online and even do it over the phone. Here’s a quickfire guide on how to get your car insured.

  1. Find an insurer

Contact an insurer and ask about the available insurance products they have. Do a little research beforehand and check out company reviews. Make sure you know what type of used car insurance you’re looking at, and remember to consider your monthly budget. Here's how to save on your monthly vehicle insurance.

  1. Submit your vehicle’s information and details

Once you’ve got your candidate insurers, share the details about your car that they asked for. This will likely include:

  • The value of your vehicle.

  • Your car’s mileage, condition and if you’ve upgraded anything.

  • Details about where you park your car, how often you use it and security measures.

  • Personal details.

  1. Get insurance quotes

Next, gather up the quotes they send to you and carefully go through everything. This includes looking at what is covered and what isn’t if you insure your second-had car, your expected excesses in the event of a claim, any benefits or conditions and how much your premiums are going to cost you.

  1. Compare insurance options

Compare your insurance options by evaluating each one against the others. While one quote may cost more monthly, it may come with added benefits and coverage than the cheaper options. Some insurance products offer cashback bonuses for claim-free periods, while others promise not to change premiums, even if you claim.

  1. Review your premiums annually

Once you’ve accepted a quote and taken out insurance on your car, don’t forget to update your information regularly. Cars decrease in value over time, which means premiums should drop since replacement values are less. Many companies will match competing quotes, so don’t be afraid to approach them with a better option. This article will help you save on your car insurance.

Other options similar to insurance

If you’re not sold on buying used car insurance, there are other financial options available to you. While similar to pre-owned vehicle insurance that either protects you and your car on the road or covers you in unfortunate or unexpected events, they are more affordable and can be suited to your specific needs.

Personal and Financial Risk Cover

Cars that have been financed but are not yet paid off are a big risk if they are written off or stolen. While insurance will pay for a replacement, you will still be on the hook for the money you still owe to the financial institution financing your now-totalled car. Products like ADCOVER® will pay any shortfall between the amount you still owe to the financial institution and how much your insurer paid out. Other options like Lifestyle Protection plans also handle outstanding vehicle debt in the event of a life-changing tragedy like a death.

Road-Accident Fund (RAF)

The Road Accident Fund is a South African state insurer that gives insurance coverage to every driver on South Africa’s roads in the event of injury or loss. If you’re involved in an accident, the RAF will settle a claim based on a percentage of the cost of the accident. Money collected through the fuel levy is used to fund the RAF.

Component Cover

Most insurance companies refuse to cover mechanical breakdowns. If you need to replace a part to avoid one, you’ll likely have to pay for it out of pocket. Component Cover acts as a small-scale insurance policy that provides financial assistance to policyholders in the event of a mechanical or electrical breakdown once their manufacturer warranties expire. Certain parts are covered based on the age of the used vehicle, and there are different levels available.

Conclusion – Betting on insurance for your used car

Insuring your used car is essential to covering the risks and dangers we face on the road. Cars are important assets, and losing one to theft, accidents, or hijacking can leave us unable to work and in a serious financial predicament.

While none of us plan on being involved in accidents or falling victim to crime, these unfortunate events can happen anytime and anywhere, even to the most cautious drivers. Used car insurance not only helps us out financially when we need it, but it also provides a comforting peace of mind for how we are able to keep our used cars safe.

Click here to learn more about what you can do to insure your second-had car or to get in touch with someone who can help you on the insurance front before you’ve even got one yet.