Your top 5 questions about car insurance answered

Everybody has questions about car insurance, whether you buy a car for the first time or the car you plan to use when you are retired. It is always a good idea to have your car insured, but why? And why is it so expensive?

Digital insurance platform, Naked, recently hosted an ask-us-anything conversation with followers on Twitter and Ernest North, co-founder, answered the five most commonly asked questions.

1. Car insurance is expensive! Why do I even need it?

North explains that comprehensive car insurance is a safety net that protects you if your car is stolen, damaged or written off, while it also covers damage to another car if you caused an accident. As long as you meet the terms and conditions of your policy, your insurance company will pay for the repair or replacement of your car if something happens to it.

“If the accident is not your fault, the insurer will try to recover the money from the responsible party and pay back your excess. If the insurer cannot recover the costs from the other driver, it will pay for repairs of your car apart from the excess you must pay. This gives you peace of mind since few people can find tens or hundreds of thousands of rands at short notice to pay for repairs or buy a new car.”

You can also buy only third-party liability insurance which costs less and North says this will protect you if you were deemed to be at fault in a collision. It covers damages you cause to someone else’s car, for example if you are unfortunate enough to crash into a R2 million BMW M4.

“This means you do not have to stress about getting sued if you caused an accident but you will not be insured for damage to or theft of your own vehicle.”

ALSO READ: Get up to speed: Your rights when buying a car

Comprehensive insurance cover on the other hand, always includes third-party liability cover. North says it is a must-have if you pay your car off or cannot afford to repair or replace it if something happens.

“It is all about figuring out what works best for you and your wallet but given the financial risks of not being insured. It is still more financially wise to get covered and we recommend buying at least third-party liability if you cannot afford comprehensive cover.”

2. Why do I pay more than someone else though we drive the same car?

North explains that your premium is based on how likely you are to claim and how much that claim will cost.

“Your insurance company will determine that by using historical data and algorithms to assess how high the risks are that you will be in an accident or that your car will be stolen. These algorithms use data such as where you drive, your age and driving experience, your credit record and previous claims to determine your risk level.”

Therefore, someone who drives less, had a licence for longer and has not claimed for 10 years will get a lower premium because the algorithms will predict that they are far less likely to be in an accident. Someone who drives a lot, claimed in the past year and only had a licence for two years may pay a bit more because there is a higher probability they will be in a collision. North says your premium will also include amounts to cover the insurer’s running costs, some profit and the cost of benefits such as cashbacks.

3. I was in an accident that was not my fault. Why must I still pay an excess?

When you are involved in an accident, your insurer will aim to get you back on the road again as soon as possible but may need a couple of weeks or months to investigate who was at fault in the accident. If it is determined that the accident was the other driver’s fault, your insurer will try to recover the damages from the third party or their insurer, North says.

“This can be a long legal process but if the insurer is successful in recovering the money, your excess will be refunded. With the number of uninsured drivers on the road, there is also no guarantee that your insurer will be able to recover your excess. We recommend choosing an excess that you can afford to pay easily to ensure you can get back on the road fast if something happens to your car.”

ALSO READ: When your car is written off, but not paid off

4. Do you pay higher premiums if you drive a car that is a hijacking risk?

North says it is true that some cars get stolen more than others, but many people overestimate how much the risk of theft contributes to their premiums. “Most of your premium goes towards covering the risks of accident damage. Your risk comes down to a combination of factors that include where your car is parked most of the time, crime patterns in the area and your driving patterns, such as long road trips or driving late at night.”

Some popular cars may be involved in more accidents or thefts but North says it is often also due to the fact that there are more of them on the road. If you are curious about how the car you choose will affect your premium, you can try getting online quotes for premiums for different makes and models.

5. My car is losing value. Why is my premium not decreasing?

“Your car loses value as time passes, making it cheaper to replace but in most claims, your insurer will need to repair your car rather than replace it. Several factors, such as inflation and exchange rates for imported parts can cause the cost of repairs to increase over time, requiring you to pay the same premium or a higher premium for a car with a lower value. If you think you might be paying too much, shop around and get some quotes. You may well find a better deal.”