You buy a new vehicle and the dealership insists that you have to have car insurance before you can drive it off the dealership floor. You comply and speedily take out insurance with an insurer you selected randomly. Question is, do you know what you have signed up for; are you aware of what your car insurance policy schedule really means, what you can and cannot do, what you are and aren’t covered for etc.?
If not, read on, as we will be explaining the five facts about vehicle insurance you need to know prior to signing up for an insurance policy.
The driver matters
Think about this: if someone else drives your car and they get into an accident, do you ask them to claim under their own insurance or from your insurance?
It is imperative to be aware that the motor insurance policy covering the vehicle involved is considered the primary insurance. This means that the vehicle owner’s insurance company must pay for damages caused by an accident – so if you were to give somebody your car and they got into an accident you are ultimately responsible as it is your vehicle that caused the damage. In saying this, it is crucial that you are familiar with the terms and conditions of your policy when allowing another person to drive your car. Certain policy schedules have specific driver limitations in respect of age and/or regular drivers. Though whoever drives your car must have a valid driver’s license (or learner’s licence while someone with a driver’s licence is in the vehicle too) and never under the influence of alcohol.
Check your cover
Read the policy documents and ask what you’re unsure of or don’t understand. Make sure that you know exactly what your policy includes and excludes. Not all policies include hail damage or windscreen cover, for example. Also by reading your policy and understanding all the terms and conditions and following them. You’ll be more likely to have your claims paid out when misfortune strikes.
When you call your chosen insurer to take out a car insurance policy, be very clear about your use of your vehicle. If you’ll use the vehicle to generate income (even if only partially), you need to declare it to ensure that your claims will be paid out.
You could even earn a little extra money by getting a tax deduction on your vehicle if you use it for work or business related activities most of the time. You can either calculate the percentage of the time you use your car for business and apply that deduction to your insurance tax return or you can use the standard deduction that SARS offers – to get more clarity on this contact your local SARS office for advice. However, remember that in order for you to claim you must keep a detailed logbook, specifying how many kilometres you travelled for business etc.
Vehicle choice matters
Did you know that the type of vehicle you have can affect your insurance rate?
Before you excitedly go and buy a brand new vehicle, consider whether it is on the hijackers list of top cars to steal. Insurers raise premiums for vehicles that they deem “high-risk” or are more likely to be stolen. Therefore, it makes sense for insurers to charge more for taking on the risk. Newer makes and models pay higher insurance rates, as do more expensive or well-known vehicles.
If you have always wanted to own the latest German sedan, or hot hatch racer, just beware that your premiums are likely to shoot up, simply because these cars are high risk for insurers and are on the top hijacker’s wish lists.
Many variables are involved in calculating your insurance premiums stretching from the colour of your car to where it’s parked during the day. When you apply for an insurance quote, they’ll ask questions about whether or not you’ve ever been in a car accident and where you park your car at night – in a garage or in the street as well as the area you live in.
They’ll want to know more about the people (and yourself) driving the car; how old they are, their gender, what their driving record looks like etc. They’ll also want to know more about the car itself, not just the make and model but the type of engine, paint, body type and age. Do you have a fitted tracking device and / or alarm installed in your car? The younger and less experienced you are, the more you will pay. Premiums can also be based, in part, on your car's’ retail value, the cost to repair it, its overall safety record, and the likelihood of theft.
So before you make a decision based purely on your vehicle repayments, also have a look at what your insurance payments will be. Why not complete a quick online insurance quote to see how much you can save when you switch to Budget Insurance.
The information provided in this article is for informational purposes only and do not constitute tax or other professional advice.