Road Safety Blog

Your top 5 questions about car insurance answered

jonckie

Whether you’re buying your first car, or whether you’re a seasoned driver, there are probably some questions you have about car insurance. Naked, the fully digital insurance platform, recently hosted an ask-us-anything conversation with followers on Twitter. Ernest North, co-founder at Naked, answers the five most commonly asked questions.

1. Car insurance is expensive! Why do I even need it?

Comprehensive car insurance is a safety net that protects you if your car is stolen, damaged or written off, as well as damage to another car if you caused an accident. As long as you meet the Ts & Cs of your policy, your insurance company will pay for the repair or replacement of your car if something happens to it.

If the accident is not your fault, the insurer will try to recover the money from the responsible party and pay back your excess. If the insurer can’t recover the costs from the other driver, it will pay for repairs of your car (apart from the excess you’ll need to pay). This gives you peace of mind, since few people can find tens or hundreds of thousands of rands at short notice to pay for repairs or buy a new car.

You can also buy only third-party liability insurance which costs less. This will protect you if you’re deemed to be at fault in a collision. It covers damages you cause to someone else’s car, like if you’re unfortunate enough to have a crash with a R2 million BMW M4. That means you don’t need to stress about getting sued if you cause an accident. But you won’t be insured for damage to or theft of your own vehicle.

Comprehensive insurance cover always includes third-party liability cover. It’s a must-have if you’re paying your car off or can’t afford to repair or replace it if something happens. It’s all about figuring out what works best for you and your wallet. But given the financial risks of not being insured and the availability of affordable digital insurance options, it’s still more financially wise to get covered. We recommend buying at least third-party liability if you can’t afford comprehensive cover.

2. Why is my insurance premium higher than my mom’s or my friend’s, even though we drive the same car?

Your premium is based on how likely you are to claim and how much that claim will cost. Your insurance company will determine that by using historical data and algorithms to assess how high the risks are that you’ll be in an accident or that your car will be stolen. These algorithms will use data like where you drive, your age and driving experience, your credit record, and your previous claims to determine your risk level.

Someone who drives less, has had a licence for longer, and hasn’t claimed for 10 years will get a lower premium because the algorithms will predict that they are far less likely to be in an accident. Someone who drives a lot, has claimed in the past year, and has only had a licence for two years may pay a bit more because there’s a higher probability they’ll be in a collision. Your premium will also include amounts to cover the insurer’s running costs, some profit and the cost benefits like cashbacks.

3. I was in an accident and it wasn’t my fault. But I still needed to pay an excess. What gives?

When you have an accident, your insurer will aim to get you back on the road again ASAP. But it may need a couple of weeks or months to investigate who was at fault in the accident. If it is determined that the accident was the other driver’s fault, your insurer will try to recover the damages from the third party or their insurer.

This can be a long legal process but if the insurer is successful in recovering the money, your excess will be refunded. With the amount of uninsured drivers on the road, there is also no guarantee that your insurer will be able to recover your excess. We recommend choosing an excess that you can afford to pay easily, so you can get back on the road fast if something happens to your car.

4. Do you charge higher premiums for cars that are hijacking risks?

It’s true that some cars get stolen more than others, but many people overestimate how much the risk of theft contributes to their premiums. Most of your premium goes towards covering the risks of accident damage. Your risk comes down to a combination of factors: where your car is parked most of the time, crime patterns in the area, and your driving patterns (e.g. do you go on long road trips often or do you often drive late at night), among others.

Some popular cars may be involved in more accidents or thefts, but it’s often also because there are more of them on the road. If you’re curious about how the car you choose will affect your premium, you can try getting online quotes for premiums for different makes and models. For example, a digital insurance platform like Naked will let you see for yourself in a matter of minutes.

5. My car is losing value, so why is my premium not decreasing?

Yes, your car loses value as time passes, so it becomes cheaper to replace it. But in most claims, your insurer will need to repair your car rather than replace it. Various factors like inflation, exchange rates for imported parts, and others can cause the cost of repairs to go up over time, causing you to pay the same premium or a higher premium for a car with a lower value. If you think you might be paying too much, shop around and get some quotes. You may well find a better deal.

Check out this Naked blog post for additional tips on how to ensure you get the best insurance quote.

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