What is car insurance and what does it cover?

A lot of banks will need you to have car insurance when you are applying for car financing in South Africa. Auto insurance can be a confusing subject for younger people. People are not really aware of how much money they can save off their car insurance premiums and what exactly is covered.

A car insurance is a contract between you and the insurance company that protects you against financial loss in the event of an accident or theft. A lot of people in South Africa are driving without insurance, this often results with them being sued or their cars written off when they get into car accidents.

Insurance is there to protect you, imagine driving your brand-new AMG only to cause an accident and never be able to drive it again because it’s not insured. Premiums may seem like a lot and you may feel like you are being ripped off, this is why it’s important to understand how auto insurance works.

There are three main types of auto insurance.

Liability car insurance

Liability Insurance is there to protect you if you are legally responsible for third party damage. This simply means; it will pay the costs if you were the one that caused the car accident. It pays the medical costs and car repair costs for the other motorists. This is the most important insurance to have, you might crash your car and not care about repairing it. But other motorists will want you to pay for repairs if the accident was your fault, they will take you to court if you can’t.

They can just claim from your car insurance if you have this policy. A lot of car insurance companies have what is called a “bodily injury limit”. This is the maximum amount of money they can pay to cover medical costs for each person that was on the car during the accident.

An insurance company may decide to pay a maximum of R10 000 in medical bills for each person. Should it happen that one of the passengers has medical bills of R15 000, you might have to pay the difference from your own pocket. Ask your insurance agent about this and if you are not satisfied with the amount, request to have it increased.

Most people don’t choose this policy as a standalone, but if you choose to, make sure that you max out the coverage. If the coverage is R550 000, then max it out, the difference in premiums is often little, you don’t save that much. You might save something like R40 for half the coverage, which is not really worth it in most cases.

Comprehensive insurance cover

Comprehensive car insurance is the highest level of protection you can get for your vehicle. Most banks will require you to take a comprehensive car insurance when you apply for car financing. Liability insurance, also known as third party insurance, only covers the third party and not you. Comprehensive insurance covers you and the third party.

This type of insurance covers you from a lot of things that are imaginable, things like theft, hijacking, damages to your car due to an accident. Things like mechanical breakdowns are not covered by this insurance.

Total loss insurance cover

Total Loss provides insurance cover to clients for the total loss of their vehicles only due to write-offs, theft or hijack, as well as limited third-party liability. Accidental damage that does not result in a total loss is not covered. If your car was insured for less than its reasonable market value, you may end up with less cash than you need to buy a similar make and model.

Factors that influence your premium

An insurance premium is similar to a credit score, there is not fixed premium, companies assess the risk before giving you coverage. Here are some of the factors that influence your premium.

1. Demographics

Your age, gender, marital status and where you live will influence your premium. Younger drivers are considered to be more reckless than married people. Your premium will be more expensive if you live in an area that is notorious for car theft and hijacking.

2. The car you drive

Driving a car that is highly targeted for theft and hijacking will definitely increase your premium. The VW polo is currently the most targeted car in South Africa. More expensive will attract a higher premium as they are more expensive to repair or replace.

3. Inflation

The inflation rate of South Africa is currently 4%, this means that the price of goods and services increase by 4% every year. This automatically mean that the cost of repairs will increase, so will your premium.

4. Security measures

Security measures you take to protect your car will impact your premium. These measures include having a tracking system, parking your car in a safe place. Parking your car in a security estate in a locked garage means that it’s less likely to be targeted than the car that gets parked on the street.

Increase your excess

An excess is the amount of money that you have to pay out of your pocket to cover some of the costs when making a claim. This is meant to discourage people from making small claims, it is compulsory, it is usually a percentage or a fixed fee. You might have to pay an out of pocket fee of R10 000 when making a claim, that won’t be worth it if you only need R11 000 to repair your car.

You can voluntarily increase your excess, increasing your excess means that you will pay lower premiums. You can save tens of thousands of Rands in the long run, but you will have to be careful. Put this money in a savings account, don’t voluntarily increase your excess if you are not sure that you will afford it.

If anything happens resulting in loss, you will have to pay a large chunk of money (both compulsory and voluntary excess). However, you can use the savings you make from the lower premium to save up for your excess.


Getting a car insurance is an important decision, we recommend that you get the comprehensive cover and increase your excess. Do you have any thoughts or questions? Comment below.

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