In the case of car insurance one size does NOT fit all

Your situation determines your options

Insurance needs are not adequately met with cookie-cutter solutions. Your unique situation in life produces specific requirements and the tailored option is certainly out there if you’re willing to identify and work around your limitations.

Start by honestly, and thoroughly, considering your financial and home situation. Work out what your budget can realistically accommodate and consider alternatives if this amount isn’t enough for decent coverage. How about sharing a car with a family member and collectively paying for comprehensive insurance for one vehicle rather than getting insufficient coverage for two cars?

There is no point in committing yourself to an amount that isn’t feasible over time. This will simply lead to being left in the lurch when you can no longer afford to pay – probably at the worst possible time. Once you have a sense of what you can manage each month you will probably already have certain insurance options ruled out, simplifying your choice.

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The standard insurance solutions for different situations

In South Africa, short-term insurance policies fall under three main categories: Comprehensive, Third Party Fire and Theft, as well as Third Party Only insurance.

  • Comprehensive insurance is the most expensive type of insurance and generally covers theft, hijacking, damages caused in an accident, fire, explosion and natural disaster. It also covers a third party’s damages.This insurance is most fitting for new and expensive cars that are used frequently and accumulate a high mileage. Comprehensive cover is the cream of the crop in insurance because it protects you from the broadest range of risks. However, it’s not necessarily the best option for all kinds of cars.
  • Third Party Fire and Theft (Limited Liability) insurance is ideal for cars that are close to being paid off and are used an average amount. This insurance generally protects you from paying for damages, determined to be your fault and suffered by a third party, including vehicle damage, accidental death, and injury caused in an accident.Importantly, the term ‘third party’ doesn’t only include other people but also businesses. So, if you’re reversing in your dentist’s parking lot and accidently damage a pole, your Third Party policy will cover you. It also makes provision for losses caused by hijacking and theft, and possibly also losses that result from fire, lighting or explosions. What this insurance doesn’t cover is collision damage. However, if you think the accident wasn’t your fault you have the option of making a claim against the other party.

     

  • Third Party Only insurance is the most limited kind of insurance as it only pays for damages incurred by a third party in the event of an accident. It doesn’t cover damages to your car, theft, hijacking, or natural disasters. As the cheapest option, this cover is appropriate for old cars that aren’t driven much.While this is the most basic kind of insurance it’s also the most necessary. Your car may be breathing its last rattling breath, but the car you accidently crash into may be a new Audi or Mercedes-Benz, making your liability potentially expensive if you have to pay out of pocket. Keep in mind that while the Road Accident Fund will pay for damages to a third party if this involves injury to the person, it won’t cover any vehicle damage.

Don’t ignore or forget about hidden benefits

A trick to look out for are potential policy discounts based on specific policy choices. You need to think beyond just your car and investigate whether getting home and vehicle insurance from the same provider will yield any perks. There are also often price breaks available to clients who insure more than one vehicle with the same insurer.

With this in mind, it’s clear that online quotes are limited in terms of the information they give. The better approach is to use online quotes as a starting point, reduce the pile to the three best options, and then phone the insurers to ask questions about the details of each policy option. Sure, it takes some effort, but if you consider that this is an amount you’ll be paying each month, for who knows how long, it’s worth finding the cheapest option.

Keep your policy up to date

Any changes in your finances or living situation could alter how much you have available for insurance and how much you will need to pay. Moving house, home renovations, or having more family members make use of your car – all these factors could change your policy needs.

You may realise that it’s too expensive to remain on your current policy and that you need to switch from Comprehensive to Third Party Fire and Theft. Or maybe you’ll find that moving to a more secure area will lower your premiums enough to allow you to bump your policy up to Comprehensive cover. Either way, it doesn’t pay to avoid regular assessments of your situation and updates to your insurer.

It’s only once you figure out the details of your circumstances that your insurer can provide a policy to match. The smart policy choice starts with thinking about your life today.