Next time you’re stuck in traffic, take a look at the cars around you. There’s a good chance that six or seven out of every ten drivers have no car insurance. All too many South Africans skip cover to save some money or because they think they can’t afford it. But in reality, one accident can damage your finances as badly as your car – even if it wasn’t your fault.
Ernest North, co-founder of Naked, the digital car and home insurance platform, says that whether you cause the accident or are the victim of another driver, the financial and legal fallout of driving without insurance can be severe, and recovery can take years.
For this reason, drivers shouldn’t see their monthly car insurance premium as a grudge purchase, but rather as an investment in peace of mind and long-term financial security.
North sums up what to expect and the consequences of getting involved in an accident if you aren’t insured.
If you were at fault, even just partially
The immediate consequence of being in an accident where you were legally at fault is that you will be liable for all damages. That means you will not only face the bill for the repair of your own car, but also for the other vehicles involved in the collision and for costs such as legal fees. If the other driver is insured, they will usually claim from their insurer. Their insurer will, in turn, send you a bill, called a recovery claim.
Says North: “If you’re unlucky enough to collide with an expensive, luxury car, the repair cost may run into hundreds of thousands or even millions of rand. If you can’t pay or refuse to pay, the insurer may take legal action. This can lead to a court order requiring you to pay back the damages with interest, affecting your disposable income for years to come. In some cases, the insurance company can also seek to attach assets like your car or home.”
If the other driver is also uninsured, they might take you to court themselves to get you to pay for their repairs, legal expenses and costs such as car hire.
One big drawback in both of these instances, is that usual insurance rules and protections don’t apply. For example, without insurance you will not be able to complain to an ombud or regulator about how the insurer treats you.
If you were not at fault
If you were not at fault, you can claim from the other driver.
- If they are insured, you can approach their insurer directly with your claim.
- If they are not insured, you’ll have to negotiate directly with them to try recover costs or take legal action yourself. For damages under R20,000, you can use the Small Claims Court without a lawyer.
But North says the path to recovering money for your damaged car is uncertain and stressful:
- You may need to pay for repairs to your car first, and then try to claim it back from the other driver. That’s hardly ideal if you don’t have savings on hand.
- You will need to prove the other driver was at fault. This can be difficult when you are facing an insured driver’s legal team. In court, it might be your word against that of another driver or their insurer’s experts. In addition, you will need to get a number of quotes to show there was a loss on your side.
- Fault is not always clear-cut. In fact, under the ‘Apportionment of Damages’ law, both drivers can be found to be partially at fault. For example, you could be held 30% responsible and still owe money even if the other driver was mostly at fault. The majority of accidents have multiple parties at fault, even if a small percentage.
- You might need to take the other driver to court to recover your money. Court cases can take months or years, and even if you win, the other driver might not have the money to pay you.
Third-party versus comprehensive insurance
Most insured drivers have comprehensive insurance because banks will insist that customers get insurance before they finance their cars. This includes cover for theft or any damage to your own car, as well as damage you cause to other vehicles or property.
“Many drivers avoid comprehensive cover because it seems too expensive, especially if they are driving an older, low-value car,” says North. “If that’s the case, it’s still important to at least have third-party insurance. This protects you against legal liability for damage your vehicle causes to other people’s property, whether it’s a car, streetlight, or a wall. The insurance provider will also help if there is a legal dispute.”
Traditional third-party cover, which often starts from R200 per month, but digital platforms have made it much more affordable. “With Naked, for example, drivers can get R10 million in third-party cover from just R70 per month, with no excess,” says North. “That’s less than a basic Netflix subscription, and far more affordable than the costs and long-term consequences of an accident if you’re held responsible.”
“The bottom line is that whether you cause an accident or are hit by an uninsured driver, the financial risks of driving without insurance can follow you for years,” says North. “Even the most basic third-party policy can protect you from severe consequences and give you the peace of mind that, if the worst happens, you won’t be left facing it alone.”