Is car insurance worth it? Why don’t my premiums go down in line with my car value? How are premiums calculated?
We teamed up with BankerX and asked the people of South Africa what they really wanted to know about insurance. We got loads of great questions - seriously, you guys didn't hold back! We did our best to answer as many as we could on Twitter, but we noticed that there were a few common questions that kept coming up.
So we thought we’d answer them in a bit more detail. Here they are:
Q: First up, how is fault determined after a car accident and does it matter?
A: Most car accidents aren’t straightforward in determining fault and it can be a lengthy process in finding that out. After an accident your insurer doesn't want you to stress about “whodunnit” – we want to get your car fixed up and back on the road ASAP.
However, if it is clear that you were not at fault, your insurer will immediately start the process of getting you back on the road BUT in parallel they will start the process in an attempt to recover the damages from the third party or their insurer. It is often a lengthy legal process but if we are successful in recovering that money your excess will be refunded.
Q: The million-dollar question… which is the most risky car to drive in South Africa?
A: Well, it's not as simple as choosing a specific type of car. It's a combination of quite a few factors: like where your car sleeps most of the time (at home and work), crime patterns in the area, and your driving patterns (do you go on long road trips often or do you often drive late at night), as well as factors specific to you. While some cars may be involved in more accidents or thefts, it's not right to assume “they must be the riskier ones to drive”. Instead, it’s very likely because they are popular cars, which means there are more of them on the road.
Q: Now, let's talk about insurance premiums, how are they calculated?
A: Ultimately, your premium is based on how likely you are to claim and how much that claim will cost. Things like your claim history, your age, where you live and work, what you are insuring, and the amount your stuff will be insured for will all impact how much your premium will be. Once your insurer has figured out your expected claims they will add on an amount to cover their operating cost, some profit and the cost of any additional benefits like cashbacks, SASRIA, etc. and lastly, add some VAT on top.
Q: If your car depreciates in value, why doesn't your premium go down?
A: This is a great question. It’s true that your car loses value as time passes, so it becomes cheaper to replace it. However, most claims are for repairs, not for a total replacement. Various factors like inflation, exchange rates for imported parts, and others can cause the cost of repairs to go up over time, leading to higher car insurance premiums.
Q: Lastly, is car insurance even worth it?
A: The truth is, it's totally up to you and your situation. If you're not too worried about being stuck with a huge bill if your car gets totalled, then maybe you don't need comprehensive coverage. But if you're driving around in constant fear of crashing into a fancy R3 Million Range Rover and getting sued for damages, then third-party liability might be more up your alley.
So, what's the difference between these types of coverage? Basically, third-party liability only covers damages you cause to someone else's car, while comprehensive covers both your car and theirs. Of course, comprehensive insurance usually costs more than third-party liability, but it also offers more protection. At the end of the day, it's all about figuring out what works best for you and your wallet.
Feel free to check out our blog for more useful content, or let us know if you have more questions outside of these five!
