Serious road accidents are a daily occurrence in South Africa. Road fatalities can reach up to 10 000 per year. With cars being the preferred transport and the high number of road accidents, insuring your vehicle has never been so vital.
Insuring your automobile is daunting to most. All the paperwork, the back and forth calls and communication, not to mention the confusing car insurance terms. Continue reading to get the answer to all your auto insurance frequently asked questions.
Most Common Auto Insurance Questions Asked and Answered
Insurance can be confusing and as a result, there are many auto insurance FAQs. Well, here are a handful of them, asked and answered for your convenience.
What is Auto Insurance?
Car insurance is a legal and binding agreement between you and your insurance company. It protects you against losses revolving around your car. These include:
- Stolen property
- Car accidents
However, the exact terms and conditions of each contract are unique to the situation. Your insurance is priced according to a variety of different factors, and it is essential to know what factors will affect your premium.
Insurance is a need. Not only does it protect you and your car if you have an accident, but it also saves you when someone else causes the accident. In some plans, if you damage someone else’s car, the insurance will pay for their losses.
What Are the Different Types of Auto Insurance coverage?
Here are different types of insurance available.
This type of insurance covers the bills for injuries to others and damage to their property if you cause an accident.
Personal injury protection (PIP)
This type of insurance is also known as “no-fault” insurance. PIP insurers cover you and the passengers in the vehicle if the accident was not your fault. It can also cover lost wages and funeral expenses.
In the case of an accident, regardless of whose fault it is, your insurance will cover the passengers’ medical bills up to a specific limit.
Covers expenses for the damages to the car after an accident.
Covers for theft of your automobile or damages resulting from something other than a road accident.
Uninsured and underinsured driver
This pays for damages caused by another who doesn’t have automobile insurance, who is underinsured (i.e., their insurance only covers the basics and not the full spectrum), or in the case of a hit-and-run.
This applies to businesses and company vehicles. It pays for the damages resulting from an accident in the line of work.
What is Accident Forgiveness?
Accident forgiveness is an insurance package that companies sell as an add-on. Forgiveness keeps your premium from increasing after your first accident (at your fault).
Insurance companies look to increase your monthly insurance rate because they deem you a high risk. Accident forgiveness is like a second chance.
This add-on might not apply to those who don’t have a clear driving history, depending on who you are insured with. Accident forgiveness sometimes comes at an extra cost, so make sure you do the math to check if it’s really worth it. If you want accident forgiveness, but your insurer doesn’t offer it, consider changing your insurance.
What Is a Deductible?
This is also called excess. A deductible only applies to types of insurance coverage that pay for damages on YOUR automobile (i.e., collision and comprehensive).
A deductible is an amount you need to pay out of your own pocket, before the insurance kicks in and pays the balance.
For example, if the damages total R10 000 and your excess is R1 000, you will pay the R1 000 and the insurance company will pay R9 000. The amount you pay for your deductible is determined in your contract and can vary for a number of reasons, including your age, driving history, or policy.
What Is Gap Insurance?
Gap insurance, also called gap protection or gap cover, is not a type of insurance but rather a debt cancellation agreement. It pays for the difference between your payable automobile loan and the amount which the insurance company pays you. In other words, the current market value of the car, excluding how much you owe on it.
Gap cover is relevant when your car is written off and the insurance pays you out to cover your losses. The gap cover will compensate for the amount you owed on the car. You can then replace the car for its current market value rather than what you would have left after paying off your debt. It is advised to check how fast your car depreciates before making the call to get gap cover.
Do I Have to Purchase All the Different Types of Coverage Available?
In most countries, it is compulsory to have at least liability coverage. In South Africa, there are no legal requirements for having automobile insurance. But, it is highly recommended.
If you are financing your car, the lender might require you to have collision and comprehensive coverage to ensure that they don’t lose out if you damage the vehicle. If you don’t finance your car and you own it in full, at least if you are financing the car, the lender might require you to have collision and comprehensive coverage to ensure they don’t lose out if you damage the vehicle. If you own your car in full, the same is recommended.
Many car owners of older model vehicles that are still in good condition consider dropping any insurance costs to save money. This happens when the car is old and isn’t worth paying to fix, but rather replacing it with the money saved from not paying car insurance.
What Does 50/100/25 Under Declaration of My Policy Mean?
Another auto insurance frequently asked question is about the declaration page of your policy. It provides you with important details regarding your coverage.
It includes the maximum amount the insurer will pay for a claim, also called the limits. And, it contains your liability coverage, the aspectof insurance that pays if you hurt anybody or damage their property in an accident at your fault.
The three numbers expressed indicate;
- The first represents the maximum amount, in thousands of Rand, that the insurer will pay to a single person. In this case, R50 000.
- The middle number represents the maximum amount they will pay for all injuries in the accident. Here, it isR100 000.
- The last number shows the maximum payout for the repair or replacement of another’s damaged property. Here, it would be R25 000.
In your policy, there will be a minimum three numbers too. These work the same, except they represent the minimum amount the insurer will pay in each case.
Final Thoughts on Car Insurance Questions
Automobile insurance shouldn’t be a scary thing. Once familiar with all the common insurance questions, car insurance won’t seem so intimidating anymore.
Armed with this knowledge you’ll be able to make the right decisions when choosing, claiming from, or adjusting your insurance.