When financing a new car in South Africa through an automaker’s finance facility, it is compulsory for you to have comprehensive car insurance. Even though the car is registered in your name you still owe money to the finance institution that financed your car. Your car is technically only yours once you have paid it off.
Buying car insurance is a serious decision. Please seek advice from a certified financial advisor before you decide to purchase car insurance. This article is for informational purposes only and it does not necessarily refer to a particular car insurance product from any specific insurer. In South Africa, with the high occurrence rate of road accidents, theft and hijackings in certain areas, even if you have paid your car off, it would still be in your best interest to have comprehensive car insurance. A report from the SAPS revealed that 16,325 cars were hijacked and 50,663 vehicles were stolen between 2017 and 2018.2
According to the AA, between 65% and 70% of the 12 million cars registered in South Africa are not insured.1 This includes Third Party liability insurance. Therefore, if you were to be involved in an accident with one of these uninsured road users, you would most likely have to pay for your own car to be repaired or replaced.
What is comprehensive car insurance?
Comprehensive car insurance is compulsory to have when you buy a new car that is being financed, but it is also a good option even if you have a fully paid-off car. But what does Comprehensive car insurance cover?
- Damages to your own car if you were in an accident (remain mindful of the excess payment that needs to be made).
- Full/partial damage done to another vehicle that was directly involved in an accident with you (Third Party cover).
When will you have to pay excess?
You will have to pay excess to your insurer when you lodge an accident claim against your car’s insurance. The reason for payment of an excess amount to insurance companies is to maintain an affordable monthly premium on your policy.3
If you were not to pay an excess, which is an option, your monthly insurance premium would most likely be excessively high.
By charging an excess insurance companies incentivise customers to not claim for every small scratches, bumps or chips on their car. Having to pay an excess is financially better for the customer in the long run.
Make sure, when you take out your insurance policy, that you can pay the required excess. Remember, you can pay little to no excess, but then your insurance premium will be much higher every month.
Tips for Buying Comprehensive Car Insurance
- Shop around: Remember, when buying a new car, to factor into your budget the monthly car insurance premium. Work out a budget beforehand, so there are no nasty surprises. Get quotes from different insurance companies.4
- Lower premiums: Lower premiums might mean the insurance company doesn’t cover everything if you have an accident. There is a reason you are paying lower premiums. Always remember to read the fine print.4
- Excess: when looking for car insurance, find an insurer that can allow you to choose an excess that best suits your budget.4
- Decreasing premiums: when your car’s value goes down, so can your insurance premium. Make sure to review your policy at least once a year – you could pay less on your car insurance and save money in the end.4
We recommend that you drive safely and obey the rules of the road whatever you decide to do regarding car insurance.
A happy PMD client, Thulani Madatshi, took the time to write the following review:
Hope this mail finds you well.
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I am happy to be part of the PMD family. Thanks once again Thato for your service. You’re the best.”