Insurance is arguably the one purchase most people need to make, but no-one really wants to, simply because it’s seen as an unrewarding expense. So, ask yourself this one question: can you really afford to pay the price to replace a damaged or stolen item ?
By definition, insurance is an arrangement to put you back in the position you were in before the loss or damage occurred. This is done in one of two ways, either the insurance company replaces the item or they give you the financial equivalent of what it would cost to replace it.
So, imagine that fancy internet-enabled flat screen TV you bought 8 years ago, falls off your TV unit. You call your insurance company to report the damage, they collect the TV and assess whether they can fix it or not. If it can be repaired for less than a new one’s cost, they will fix it. If not, your TV will be replaced with a new one.
Car insurance - the sum of the parts costs more than the whole
When it comes to your vehicle though, insurance works a little differently. Basically, there are two types of car insurance:
- 3rd Party Fire and Theft
- Comprehensive Cover
If you drive an older model car, that has been paid off, that you are not too concerned to replace if it’s damaged, then 3rd Party Fire and Theft is usually the option to choose. The type of cover is the least expensive option, and will ensure that any object you collide with will be fixed, however your own vehicle will not be repaired or paid out for. The flip side is that if your car is stolen or catches alight, you will be paid out.
Comprehensive insurance is just that, comprehensive – it covers damage caused by you, your child, spouse, in-law or somebody else on the road. What isn’t covered is damage caused by the insured being drunk or drugged while driving, being an unlicensed driver, having a unroadworthy vehicle or civil unrest, such as during a riot. In the first four cases you would have to cover from your own pocket. While damage due to civil unrest would be covered by Sasria , a short-term insurance company with a specific mandate for this.
One of the most misunderstood aspects of insurance is why the repairs seem to cost so much, while the value of vehicle itself has depreciated. This is because the cost of the parts has not decreased - in some cases, the cost may even have increased, while other parts might have to be shipped from overseas, which would add to the expense. Service providers, such as panel beaters, also have to cover parts, their costs and run a profitable business, increasing the overall repair charges.
How are insurance premiums calculated?
Insurance is provided on a risk basis and you are paid out of the pool of money collected from all the policyholders.
Companies ask themselves what it would cost to replace the item you want insured and how well protected it is. For car insurance, this would involve finding out the make and model, where the car is parked during the day and night, if it has a radio, who will be driving the vehicle most of the time and what type of driver they are, based on previous insurance history etc.
Your answers here determine the monthly premium, the excess you will have to pay when you submit a claim and if at claim time, your submission will be accepted – always be honest in your answers to avoid claim rejection.
What is the excess?
This is another aspect of insurance that people struggle with. The excess is the payment the policyholder is expected to make as their part of the contractual agreement with the insurance company. The excess also ensures that claims are legitimate and helps prevent people from making fraudulent or continuous claims. In essence, the excess keeps you honest. As a rule of thumb, the lower the premium the higher the excess is.
How do you choose an insurance company
Before looking for insurance, draw up your requirements, listing exactly what you want from your insurance company. Remember to include any rewards they may provide, on-road benefits, and most importantly, tracking services to ensure your safety behind the wheel.
Cartrack, world-leaders in vehicle tracking and recovery, have arrangements in place with a number of insurance companies who install our devices. In addition to the recovery services which help reduce your premium, we are also able to supply telematics data to our insurance partners. They in turn use this data for a number of reasons, but mainly to determine premiums through historical driving data and to modify driver behaviour to reduce on-road risk.
Cartrack’s mobile app is a great way for you to keep track for your own driving behaviour to ensure that your premiums remain as low as possible. Not only can you track your car, you can check your driving stats, activate a digital car-guard and even request emergency assistance, all from your mobile device.
When choosing an insurance company, ensure you choose the one with a tracking and telematics partner that puts you in control.