Car insurance snags to keep in mind
Cheapest isn’t always the best
WHEN it comes to vehicle insurance, the decision about which cover to choose is not one you can afford to take lightly.
You have three options. The first is comprehensive cover, which protects you in the case of theft, hijacking, accidental damage, fire and natural disasters, such as hail. You’ll also be covered for thirdparty claims if you are responsible for an accident.
The second type of cover is thirdparty, theft and fire insurance. It covers claims from people whose cars you are responsible for damaging, and pays out for repairs needed due to theft or fire — but if your car is dented by hail or in an accident, you’ll be responsible for the repairs and for replacing the car if it’s written off.
The last type of cover is thirdparty, the least-expensive option. This does not cover you for loss or damage to your car, nor are you covered for theft.
Consider your financial situation — and the value of your vehicle. If you are paying off your car and the replacement cost is high, go for comprehensive cover.
The other element of insurance that many people tend to overlook is whether their vehicle is insured for private or commercial use.
If you use your car in the little business you run on the side but also have a full-time job, you must ensure your vehicle has the right cover.
Philippa Wild, head of technical marketing for Discovery Insure, warned: “If a client insures their car for personal use but uses it to generate income, it could result in a claim being rejected.”
If the owner doesn’t reveal what the car is used for, the risk may not have been correctly assessed, and the wrong premium would have been charged, Wild said.
“It is therefore crucial to get advice and read the entire contract to understand all the terms of the insurance policy.”
No matter what, do not settle for the cheapest quote. Cheap insurance doesn’t always mean good service. You want to go with a company that won’t give you a headache when you need to submit claims.
Doing homework and asking friends and family which insurance company they’re with works. You should also talk to a financial adviser about which cover is most suitable. Make sure you know exactly what you’re covered for, especially in the event of an accident.
If you opt for comprehensive cover, make sure you are covered for the capital and interest payments on your car. Some policies cater only for the amount the car cost you and not the amount you’re paying back to the bank. For example, if you bought a car for R150 000 and the total you’re repaying to the bank is R200 000, your insurance might cover only the R150 000. You will still have to pay the outstanding R50 000.
This could have a big impact on your finances if you’re already in a tight spot.