Getting car insurance is an important first step towards financial responsibility. Anything can happen on the road and “insurance is there to help you manage big costs, should something go wrong,” says Keletso Mpisane, head of Blink by MiWay.
But insurance rules and lingo can be confusing or overwhelming for first-time buyers. Here are some answers to the big questions you may have when looking for car cover.
How much should I spend on insurance?
The price is often the first detail people want to know when considering insurance quotes. It’s an important question to ask, but it shouldn’t be the only one. Some quotes can give you lower monthly payments but have sizable and additional excess costs if you need to claim.
“There are many factors that affect your premiums like the area you live in, the risk profile of the car, and your driving track record,” Mpisane reminds us. “This is why anyone looking for cover should compare at least three different quotes.”
Comparing will help you gauge what a fair price is but it’s still important to be cautious.
“All insurance seekers should read the fine print and ask questions if they don’t fully understand the contract terms,” says Mpisane.
Once you sign up for car insurance, start saving towards that excess amount because claims never come at a convenient time.
Which cover option do I need?
How you buy the car can impact the kind of insurance you will need.
If you are using vehicle finance to get it, you will need to have comprehensive cover because the asset is registered in the name of the bank until the loan is paid off, additionally, you could include a credit shortfall to your cover while your car is under financing.
If the car is paid off and you only want to cover your car for mishaps, then you may look at other kinds of cover.
What if a family member drives my car sometimes?
This isn’t a problem if the insurer has received the correct regular driver details. Whoever drives most often in a month should be listed as the regular driver. “Insurers need to know who the regular driver is so they can create an accurate risk profile. This profile affects how we calculate premiums,” says Mpisane.
But this rule can be abused if people aren’t honest. For example, a father might claim to be the regular driver of a car that he is buying for his teenager to avoid paying a higher premium.
If a claim assessment is underway after an accident and it’s discovered that the correct driver was not noted on the policy this may adversely affect your claim. .
“This doesn’t mean your spouse or friend can’t drive your car at all. If the car is involved in an accident and the driver was doing so legally while sticking to policy conditions, then the policy should be paid out,” she says.
The bottom line is to always be honest. Higher premiums or additional excess depending on the terms of the policy are better than a rejected claim or reduced insurance pay out when you need it.
How is the car’s value decided if it gets stolen or written off?
It depends on what value your car is insured for. There are three categories you should know:
- The first is insurance for retail value, which means you will be covered for the car’s average current selling price from a dealership.
- Then there’s trade value, which insures you for the average price a dealer would pay for the car.
- Lastly there is market value, which is the average amount between the car’s retail and trade value.
“Extras like sunroofs and leather seats can increase the insured value of the car, because it’s more expensive than the average model on a dealership floor. This is why you must declare extras when signing up for cover,” says Mpisane.
If an insurer wasn’t aware of a car’s extras before a claim and it ends up being written off, insurers will only cover a portion of your debt, possibly leaving you with a shortfall with your finance provider.
“Being honest about your insurance needs is the best way to avoid financial headaches should you need to make a claim in future,” stresses Mpisane.