Insurance for your car

Different types

Did you know there is more than one type of insurance that you can take in respect of your car? In this article we will explain the different types and give you all the tips and tricks you need to make sure that you are not overpaying for your insurance.

Car insurance

Car insurance covers you in the event that your vehicle is involved in an accident, you get highjacked or it is stolen. If you own a vehicle it is very important that you have some insurance over it.

Is car insurance mandatory?

If your vehicle is financed, it will always be a condition of the finance institution that it is comprehensively insured at all times.

TIP 1: Policies that are bought from brokers outside of the company providing the finance are almost always cheaper than what you can get from the finance company. Always shop around for the best premium. It is your right to insure with whoever you like.

TIP 2: When buying a vehicle watch out for the insurance that the dealership will try sell you – it will likewise not be the most cost effective.

TIP 3: It is very important to let your finance company have the details of your external policy. If you do not do this they will simply add a policy to your monthly payment which will be difficult to get reversed.

TIP 4: Have your insurance policy reviewed every year to make sure that you are paying for cover no more than what the insurer will pay out if it is stolen or written off.

TIP 5: A tracking device might be a requirement of the policy. Factor this cost in when comparing prices. If it is not a requirement then you may still get a reduced premium if one is installed – don’t forget to ask!

My vehicle is not financed. Must I still insure it?

If your vehicle is not financed there is no legal obligation to carry insurance in South Africa. Other countries may have other regulations. The question then comes in as to why insure the vehicle at all, particularly if it is an old runabout? The answer is because if the driver of a vehicle is the cause of an accident, and let’s face it anybody can make a mistake, then that person is liable for the damaged caused to the other vehicles in the accident and also even street and traffic lights etc. If you cause such damage you will be sued to pay up – imagine what would happen to your life if you had to pay off the damage you caused riding into the back of a Lamborghini! You saved R200 per month to get sued for R1.9 million!

If you are not concerned about losing the vehicle due to an accident then the best bet is to ask your broker to quote for Third Party Insurance. This kind of policy is much cheaper than the usual comprehensive insurance, but will pay out to only the people whose property you damaged and will not compensate you for your own losses.

Car maintenance plans

A car maintenance plan is a type of insurance that covers your vehicle for maintenance over a period of time. This type of insurance is great because it gives you a good deal of certainty about the running costs of your car but is generally more expensive than simply paying for the maintenance as and when it occurs. Even worse not all maintenance plans cover all eventualities. If you are considering a maintenance plan then look carefully at the following in order to make an informed choice:

· If the vehicle is not new, from which service and parts will the maintenance be covered? You may have to wait a certain period or mileage before the policy kicks in.

· What is the period and mileage that you are covered for?

· Find out from the dealer what the prices are currently for the different intervals of service that you will likely have over the term of the maintenance plan. Add them up and then compare that to what you will pay for the plan.

· What is (and what is not) covered by the plan. Usually tyres are excluded but the plan may exclude all sorts of things

· Does the plan cover breakdowns and parts that are not part of the vehicle’s regular maintenance plan.

· Is there a restriction on where the vehicle must be maintained - is the authorised dealer network excluded?

Finally, if you are purchasing the plan at the time you buy the vehicle, consider the following carefully:

· The maintenance plan will be financed over the whole term of the agreement – the maintenance may be for three years and the vehicle for six, so effectively in the last three years you will still be paying the first three years maintenance off.

· You will pay interest on the plan.

· There may be a cheaper maintenance plan available via a broker not associated with the dealer.

· Can you transfer the plan if you sell the vehicle?

Car extended warranty

All goods (including cars) sold in South Africa must carry a minimum of a six-month warranty. In reality car manufacturers give a much longer warranty, normally 5 years. For so long as this warranty lasts the manufacturer will pay for the repair and replacement of parts that may fail, but not as a result of wear and tear. When that warranty runs out you may purchase an insurance policy that covers you in the same way, especially for the major (and very expensive) components of the car. This is a good idea because it protects you in the event of some such thing going and you having to come up with a large sum of money unexpectantly to get you back on the road.

TIP: Extended warranties are not all the same. Always check what components will be covered and up to what cost the cover is and check this with the dealer to make an informed decision on the cover you need. Just like with maintenance plans also check where the work will need to be done.

TIP: Many dealers will try sell you an extended warranty on a new car or even a second hand one that still has time and distance on the original manufacturer’s warranty.

· Once again this might not be the most cost-effective policy you can find – shop around

· If you do not intend to keep the vehicle beyond the term of the manufacturer’s warranty why take the policy at all? It will not add any value to the resell rice you will get for the car.

· Remember if you are financing the car you will also be paying off interest on the warranty.

Other extended warranties

There are a wide range of extended warranties available from shops selling white goods such as washing machines and TV’s. These warranties tend to be rather expensive and you can probably find a better deal by going direct to the insurer or through a broker. For some appliances such as washing machines that have many parts that experience wear it may make sense to take out a warranty, but for others such as TV’s if it has not broken during the initial warranty it is unlikely to do so during any extended warranty period.

TIP 1: It might be stating the obvious, but remember to carefully file your receipt and warranty documents for any appliance warranty that you buy on the shop floor. These policies will often only pay if you can produce both documents.

TIP 2: Even more obvious don’t forget that you took a warranty over the item in the first place. If it does break down make always check to see if you have cover first.

Thanks

Our thanks to the team at In2Insurance for their help with this post. In2Insurance provide a comprehensive range of insurance product and great service. I personally use them.

Read more about Insurance in general here

Read about insuring your home contents and other things here