With some 800,000 vehicle accidents of varying degrees of seriousness in South Africa each year, chances are that you’ll be involved in a bumper bashing or vehicle collision at some point in your driving career. In spite of that reality, 60-70% of the 11 million vehicles on South Africa’s roads are completely uninsured. Why? Because many car owners mistakenly believe that they cannot afford car insurance or that it’s not worth covering an older, lower value vehicle.
But if you’re involved in a collision which is found to be your fault, you will be grateful if you have insurance. If you do, your insurer should pay for the repairs to the other cars involved in the accident, and you’ll be able to get on with your life. Without insurance, the other drivers’ insurer will seek to recover the cost of the damages from you. You could get caught up in a long court case and end up repaying the insurer for damages for years. This can be avoided by taking out third-party liability cover.
Comprehensive versus third-party insurance
Most South Africans that have car insurance tend to opt for comprehensive cover. A comprehensive policy includes cover for any damage to your own car or the theft of your car, as well as for damage you cause to other vehicles or property. If you finance your vehicle, your lender will insist that you get a comprehensive policy. But if you’re driving an older vehicle that isn’t worth much and are under financial pressure, the costs of comprehensive insurance may seem unaffordable.
This is where a third-party-only policy fills an important gap. Such a policy only protects you from legal liability to another party. In a collision involving a shiny new sports car or multiple vehicles, the liability could add up to millions of rands. Third-party car insurance protects you from the legal liability that arises from you damaging someone else’s property in an accident that was deemed to be your fault. Property may mean a vehicle and its contents as well as a building or set of traffic lights you collided with.
Digital insurance means third-party only cover is accessible and affordable
One reason that third-party insurance hasn’t taken off is that it was traditionally quite expensive. If you get a policy from a traditional insurer, your policy might cost R200 or more a month for R5 million in third-party cover. That’s still quite high if you’re struggling to make ends meet. Technology, however, is helping to bring costs down. Because digital insurers don’t have the high overheads of conventional insurers, they can offer policies for as little as R50 per month. R600 a year is a small price to pay for peace of mind.
At this cost, you can keep third-party cover, even if you can no longer afford comprehensive cover during difficult times. What’s more, buying a third-party policy for your first car is a bit like getting a credit card to build a credit history. If you’ve had five years of third-party only insurance by the time you buy a new car on credit, it can help to bring the costs of your comprehensive cover down. That’s because insurers tend to see drivers who have never had any insurance as higher risks.
Here are some tips about how to choose insurance:
● Make sure you understand the difference between comprehensive, third-party liability, and stationary cover.
● Assess your ability to pay for costs such as repairs or replacement of your car out of your own pocket to decide which option is right for your budget and tolerance for risk.
● Read online reviews and seek quotes. With an online insurer, you can experiment with options such as different excess levels to get the right choice for your needs and budget, then pay online when ready. No need for long conversations with call centres!
● Carefully read policy wording for each policy you are considering.
[By Ernest North, co-founder of digital insurance platform Naked]