In South Africa there are various forms of car insurance, each with pros and cons. What are they, and how do you make sense of it?
If you buy a car that is financed, your financial borrower will insist on insurance as technically the financial institution owns the car until it is fully paid off. If you buy privately and pay in cash, the onus is on you to take out insurance, or not…
A South African reality is that around half of all cars on the road have no insurance cover.
First and foremost, insurance is there to take the financial risk off your shoulders to cover all costs related to the accident. Should you be involved in an accident and have no cover, you are liable to fork out the costs for repairs not only to your own car, but any other party involved in the accident.
If you cannot afford to repair your own car, you will be without transport, and what if you run into a Rolls-Royce or a Ferrari – you could lose your house or go bankrupt in paying for those repair costs, as the owner of that car (or its insurer) has every legal right to sue you for damages incurred.
Should you take out no insurance cover whatsoever, you might want to re-think your strategy.
This is the cheapest form of insurance. It covers the costs of other parties you may have an accident with, but you are still liable for repairs costs to your own car. This way, the Rolls-Royce and Ferrari are covered should you be responsible for its damage.
THIRD PARTY, FIRE & THEFT
The same as above, but the insurer will pay out should you lose your car through accidental damage such as a fire, or if your car is hijacked or stolen.
Obviously the most expensive form of insurance, but this time your insurer will pay out for damages to your own car as well as that of other parties involved in the accident. Your insurance premium will be determined by our excess amount, which you can negotiate with the insurer – the higher the excess fee, the lower the premium, and vice versa.
Always keep a ‘rainy day’ fund so you can at least cover the excess amount when the need arises.