Many South African motorists are unaware of the different values they can insure their vehicles for, leading to potential financial setbacks in the event of a total loss or major damage to their vehicles. When accidents occur, vehicle owners who do not have insurance on their cars run the risk of having to pay out of pocket, which could be a huge financial setback, not only for themselves but for others involved in the accident. The Automobile Association (AA) states that it remains concerned that less than 35% of vehicles in the country are insured, while the rest are not.
Understanding the different insurance values
Four key insurance values to help make informed decisions on car cover:
1. Retail value – The price a dealer would sell the vehicle for today. This option provides the highest payout in case of a claim and is typically recommended for newer vehicles.
2. Market value – The average of what similar cars are selling for, considering depreciation. This is a balanced option, as it keeps premiums reasonable while offering a fair payout.
3. Trade value – The amount a dealer would pay if the car were traded in. Choosing this option results in lower premiums but may not cover replacement costs in the event of a total loss.
4. Special Agreed value – Typically used for classic, rare, or heavily modified vehicles, this value is set between the insurer and the policyholder based on an agreed-upon amount.
Practical advice for motorists
Motorists should carefully consider their insurance needs and choose a value that best suits their financial situation and the condition of their vehicle.
Ways to save money on vehicle insurance
To save money on car insurance, consider buying a cheaper car, as lower-value vehicles cost less to insure. Annually reviewing your policy makes sense, too, as cars depreciate over time and your circumstances may change as well. Driving less to reduce accident and theft risks, and keeping your car secure in a locked garage, can lower premiums. Utilising technology by installing tracking or anti-theft devices can make insurance more affordable. Avoiding unnecessary claims to maintain a good claims history positively impacts your premiums. Most importantly, staying insured and not letting your policy lapse could lead to higher costs in the future, so it’s best to keep insurance consistent.
Many customers opt for market value when it comes to their car cover, as it balances affordability and payout expectations, but it’s important to understand the implications of each option available. If your car is written off or stolen, the payout you receive depends entirely on the value you selected.
With approximately 65% of motorists in South Africa being uninsured, according to the South African Insurance Association (SAIA), this emphasises the critical need for adequate car insurance. Many insured drivers are not aware of the different values at which they can insure their vehicles, leading to potential financial surprises at the claim stage. Motorists should regularly review their policies to ensure their chosen value still aligns with their financial situation and risk appetite.
* Masiye is a spokesperson at Miway.
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