Page 21 - IFV_Issue 5_May_2022

Motoring

he world of car insurance can be (whether or not you were responsible “If you’re involved in an accident
confusing to navigate for first- for the accident). before you’ve paid off your car, you will
Ttime car buyers as there is already •Third-party only policies provide cover be liable to pay off the balloon payment.
so much to consider when selecting the in the event that you cause damage to To help cover this cost, you can apply
right car and deal. Ultimately, insurance or destroy someone else’s car. This type for shortfall cover to make up the
provides a safety net that should return of cover does not include cover for difference between the market value of
you to the same financial position you your own car, so you will need to foot your car and the amount you still owe
were in before an incident occurred. the bill for repairs or replacement. on the car at the time of the accident.
For many, this safety net could make •Third-party with fire and theft insurance Adding shortfall cover to your policy will
the world of difference when the covers everything that is included in a increase your premium, but the risk of
unexpected happens. third-party only policy, but includes losing your car while you’re still paying
fire, theft and hijacking. With this type it off is not something worth gambling
IS CAR INSURANCE NECESSARY? of policy, you will not personally be on.”
The short answer is yes, according covered against accidental damage
to Bertus Visser, Chief Executive of with another vehicle or with a HOW WILL MY INSURANCE
Distribution at PSG Insure. He adds: stationary object. PREMIUM BE DETERMINED?
“You may think you are a good Insurers base their premiums on each
and conscientious driver, but the WHAT IS AN EXCESS AND HOW individual’s risk profile. Aspects that
unfortunate reality is that the way other DOES IT WORK? are used to determine your risk profile
people drive is completely out of your What many first-time car buyers don’t include your age, driving experience,
control. There is also the reality of drunk realise is that, before an insurance claim your claim history, your average annual
driving to consider. This remains one is honoured, the claimant has a financial mileage and your credit rating. Other
of the biggest threats to South African obligation to pay what is known as ‘the determining risk factors include the
motorists – 961 drunk drivers were first amount’ payable, or ‘excess’. Your make, model and value of the car, as well
arrested in South Africa in January 2022 excess amount will be determined by as geographic risk factors depending on
alone.” your risk profile. where you live. For instance, if you live
Another factor to consider is the “You can also opt for a voluntary in a relatively quiet and safe suburb, you
prevalence of auto-related crime, excess,” says Visser, “which allows you to will pay less than if you live in a high risk
including theft and hijackings. set your own higher excess amount, so area.
“This kind of crime can be devastating that you are able to lower your insurance First-time car buyers with little driving
on multiple levels,” says Visser, “including premium. To make this work for you, experience can generally expect higher
financially. Thus, car insurance is not you’ll need to weigh up the pros and premiums than experienced drivers,
only about your driving abilities, but also cons of each option with your adviser.” but by driving responsibly, avoiding
about safeguarding against everyday unnecessary claims and adding security
hazards that are outside of your control.” WHAT IS A BALLOON PAYMENT measures to protect your car, you can
AND IS IT INSURABLE? negotiate lower premiums over time.
DIFFERENT TYPES OF COVER Balloon payment arrangements Visser concludes: “It is important to
Each company has different policies are an increasingly popular way of note that if you buy your car using vehicle
and nuances within those policies, but financing a car in South Africa. These financing, most banks will require you
traditionally, car insurance falls into kinds of arrangements work by allowing to insure your new car even before you
three broad categories: comprehensive, car buyers to enjoy relatively low leave the dealership, as part of the loan
third-party only and third-party liability instalments on a car purchase and then agreement. There are a variety of factors
with fire and theft cover. they pay a lump sum (balloon payment) to consider when selecting the right
To explain each category in greater when the loan term comes to an end. insurance package, and cost is only one
detail: “While this may be a viable way of element. Therefore, it is important to
•A comprehensive insurance policy paying off a car for some people, for speak to a financial adviser that can help
provides cover against crime, weather others, it’s a risky decision that may negotiate the best deal whilst ensuring
damage or destruction, and covers prove expensive when you want to pay you have adequate cover for one of the
you if you’re involved in an accident the car off,” says Visser. most valuable objects you can own.”

The Villager • Issue 5 2022 • 19