What do I need to know about insuring my vehicle?

Insurance is a grudge purchase, so many people risk driving without it.

When you sit in traffic, staring at the sea of cars around you, consider this sobering thought: most of the vehicles you see are not insured. The Automobile Association (AA) estimates that more than a million legally registered cars on our roads have no insurance at all. Add another 800 000 unregistered, illegal vehicles and you are looking at a reality where roughly 70 percent of drivers are not insured.

So, if someone crashes into you and they have no insurance, who pays? If you don’t have cover, the answer is simple: you do.

If you think insurance is expensive, you should consider the cost of vehicle repairs or replacing your vehicle. Many people are unaware how expensive repairs can be until they are in an accident. Accidents can happen even to careful drivers and you may even find yourself liable for someone else’s vehicle.

If your vehicle is financed, you may have to insure it and also take out credit life insurance.

Before you sign up for any policy, or drive another kilometre, read this guide to vehicle insurance so you are sure you understand all the T&Cs and abide by all the conditions to ensure you are covered should something happen to your vehicle.

Types of vehicle insurance

Insurers offer three kinds of insurance:

1. Comprehensive insurance

This is the full package. It covers you for accidental damage, theft, hijacking, natural disasters, fire, and claims others may bring against you. It is the most expensive option, but it gives you the widest protection.

2. Third-party, fire and theft

This is a mid-range option. It covers your vehicle if it is stolen or damaged by fire, and it covers you if you cause damage to someone else’s car. What it does not cover is damage to your own car in an accident.

3. Third-party only

This is your basic budget-friendly cover. It only protects you from liability if you damage someone else’s vehicle or property. Your own car is not covered for anything, not even accidents.

Special add-ons

Many insurers add in optional extras on their policies such as:

• Cover for pothole damage
• Roadside assistance
• Emergency medical cover
• Car hire after an accident
• Scratch and dent cover

These vary from insurer to insurer, so always check what is included and what costs extra.

Why car insurance matters

Although there is no legal obligation to have car insurance in South Africa, it remains a smart and often unavoidable choice. If your vehicle is financed, most banks require full cover before approving a loan. Without insurance, motorists take on the very real risk of paying large amounts out of pocket after a crash, covering their own repairs and the damage caused to others.

South Africa operates under partial fault rules, which means you can still be held partly responsible for damages even when the accident is not entirely your fault. Imagine driving along minding your own business when someone reverses into your lane. If your speed is found to have contributed to the accident, you or your insurer may have to carry part of the costs.

The Road Accident Fund (RAF) offers limited compensation for injury or death, but it provides no protection for your vehicle or that of any other party involved.

If you are insured, however, your insurer will manage the claim and negotiate on your behalf, to secure the best possible settlement and then settle the claim. This gives you a financial safety net that prevents a bad day from turning into a long-term crisis.

How to shop for car insurance quotes

Don’t just pick the first insurer you see advertised. Shop around. Get several quotes and make sure you are comparing similar cover. One insurer might offer pothole protection as standard, while another charges extra. Some policies include emergency medical cover, others don’t.

If you are using a broker, they can compare quotes for you and help match the cover to your needs. If you’re doing it yourself, take a few minutes to check that the insurer is authorised by the Financial Sector Conduct Authority (FSCA). This ensures you are dealing with a legitimate company.

How much should I insure the car for?

You can insure your car for different values, and understanding the difference between retail, trade and market value is key to knowing how your premium is calculated.

The retail value is what you would pay at a dealership to buy your car – the same model and year - and is usually closest to the true replacement cost.

The trade or book value is what a dealer would typically offer you for your car as a trade-in.

The market value is generally lower than retail and reflects what you could realistically get if you sold the car privately, taking into account the mileage, condition, service history and past accidents of the vehicle.

There is no single correct `value to insure your car for, although many insurers recommend insuring at replacement value, which is usually the retail value, to ensure you are adequately covered if the vehicle is stolen or written off.

When you are financing a vehicle, it is useful to take out credit shortfall insurance to cover the difference between your vehicle’s retail value and the amount you owe on your vehicle loan. 

Your vehicle will depreciate quickly in the first few years, potentially faster than you can repay your loan plus the interest.  

If, for example, you buy a vehicle for R140 000 and a year later the retail value is only R110 000 and the car is written off, your insurer will pay the vehicle financier – your bank, for example – R110 000. If your loan is still worth R125 000, you will owe R15 000 to the bank and will have to replace your vehicle and keep paying for the old one until the R15 000 is repaid. If you have credit shortfall insurance, this outstanding amount will be covered.

Factors that affect insurance premiums

Understanding why insurance premiums differ is easier when you know what insurers consider. Premiums reflect the risk of accidents or theft and are based on several key factors.

WHAT AFFECTS YOUR MOTOR VEHICLE INSURANCE
FACTOR	WHY IT AFFECTS YOUR PREMIUM
Demographics	Your age, gender, marital status and where you live all shape your risk profile.
Previous claims	A history of claims raises your risk rating. Being honest is essential because inaccurate information can affect future payouts.
Car type	High-value cars or models targeted by criminals cost more to insure.
Repair costs	Parts, labour and paint get pricier every year, pushing premiums up.
Regular driver	Premiums are based on the main driver’s age, experience and claims history. Younger drivers cost more; experienced drivers cost less.
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Why it matters who drives the vehicle regularly

Many policyholders underestimate just how important full honesty is when they state who regularly drives the vehicle, whether the vehicle is used for private or business purposes or their previous losses, as this affects the insurer’s assessment of the risk.

If you are dishonest, for example, saying an experienced driver is the regular driver when the vehicle is used by a newly licensed young adult, when you need to claim, the policy may be declared void and the claim rejected. Premiums less costs may be refunded but could be well short of your claim.

It is also very important to meet the policy requirements, such as fitting a tracker for theft cover.

What you need to know about excess insurance

Excess is the portion of a claim that you must pay from your own pocket before your insurer covers the rest. When you take out car insurance, you choose an excess amount, and that figure determines how much you must contribute if you need to claim.

For example, if your excess is R4 000 and your car sustains damage costing R60 000 to repair, you would pay the first R4 000 and your insurer would cover the remaining R56 000. But if you bump a pole in a car park and the damage comes to R2 500, the repair cost is lower than your excess, so you wouldn’t claim – the full R2 500 would be for your own account.

Do you always have to pay excess, even when the accident wasn’t your fault? Yes. Excess is payable on every claim. Some insurers may offer zero-excess benefits on specific minor claims, such as small windscreen repairs under a set amount, but this varies.

Even when another driver caused the accident, you will still pay your excess upfront while the matter is resolved. If the insurer successfully recovers the cost of the claim from the at-fault driver, they will then refund your excess. However, recovery can take time, as it often involves a legal process.