Know the d ifference between car insurance and RAF cover

A CAR accident can be devastating in a number of ways: the cost of replacing a vehicle damaged beyond repair, huge medical bills, the death of loved ones, and the psychological trauma as a result. To minimise the impact you need to plan appropriately and educate yourself.

Two financial solutions are applicable – vehicle insurance and the Road Accident Fund (RAF) – and it is useful to understand what protection each of these offers.

In South Africa, many cars on the road are, in fact, uninsured. According to the Automobile Association, “at any time, there are over a million uninsured drivers on the roads with legal vehicles and about 800000 unregistered, illegal vehicles (on South African roads).

That means about 70% of people on the road don’t have insurance”.

Car insurance can be seen to be a grudge purchase – something people have to buy but don’t really enjoy buying – but it is advisable for every driver to insure their car so they have peace of mind knowing that, should it be damaged as a result of any of the insured risks, they would not suffer heavy financial loss.

Regarding the RAF, many drivers do not know what it covers.

In a nutshell, the RAF indemnifies a driver against claims for damages in respect of bodily injury sustained during an accident or death, while car insurance covers the vehicle.

What is covered by the RAF?

The RAF offers limited third-party liability for bodily injury or death – it covers people, not things. In simple terms, if you cause a car accident, the other driver or passengers may claim from the RAF for financial loss they might have suffered instead of you having to cover that cost. It does not protect you from being held liable for the damage you might have caused to someone else’s vehicle in the accident.

The fund was set up by the government and is funded through fuel levies. It receives R2.18 per litre of fuel sold to compensate car accident victims and it pays out in excess of R4 billion every month and processes tens of thousands of claims.

Finance Minister Enoch Godongwana recently announced that the levy will remain unchanged in 2022, the first time in over 30 years that the levy has not been increased. This comes as a welcome relief to motorists who now need to pay more than R20 per litre of petrol.

Claim payments aim to cover medical costs, compensation for the permanent loss of a limb or other serious bodily harm, loss of income and legal fees. While it may be fairly straightforward to determine the amount due when someone is unable to work for a month, the calculation for loss of income becomes more complicated should the injured person never be able to work again.

What is covered by private car insurance?

Ensuring your vehicle is comprehensively insured provides protection against heavy financial loss if you are involved in an accident, especially if the other vehicle is not insured. If someone else drives into you and they are not insured, the chances of you recouping the costs of fixing or replacing your vehicle from them is very slim. If you are insured, your insurer will cover those costs and try to recover the costs from the other party on your behalf.

Options available to car insurance customers vary from insurer to insurer. For example, the maximum amount that an insurer will pay to cover the other party’s damages differs among insurance companies. Imagine driving into a Ferrari and your insurer only covers part of the bill to get it fixed!

The options available to consumers are typically the following:

“Total loss” typically covers you only if the vehicle is a “total loss”, meaning it is written-off (the cost to repair is more than the value of the vehicle) or stolen. Any claims for an amount less than the value of the vehicle are not covered and you would have to pay for any repairs.

“Third-party only” insurance cover typically provides liability cover for any damage the insured car may cause to the property of another person (the third party).

“Third-party, fire and theft” cover, which covers you against car theft, fire-related damages, and damages the driver may have caused to another person’s vehicle or property in an accident.

“Comprehensive” insurance provides the widest cover, including theft and hijacking, accidents, fire or explosion, natural disasters and weather-related damage, such as hail damage.

Head of MiWay Blink, Christiaan Steyn says: “While comprehensive cover is the most expensive option, it provides peace of mind that the most common causes of vehicle damage will be covered. While vehicle values depreciate over time, the cost to repair them keeps increasing and as a result you could be left with a nasty surprise if you need to fix yours or someone else’s vehicle yourself following a car accident.”

Personal car insurance policies do not directly cover damage to the vehicle as a result of politically motivated acts of violence, including civil commotion, public disorder, strikes, riots and terrorism.

State-owned insurer, the South African Special Risks Insurance Association (Sasria), provides cover against these risks. Sasria cover is usually included or added by default to comprehensive car insurance policies, though you can opt out.

The RAF, on the other hand, gives road users comfort in knowing that, should they have caused a car accident, the RAF is responsible to compensate the other parties for any personal injuries and/or inability to earn.