How Much Car Insurance Cover Do You Really Need?

Right now is a good time to figure out how much you can afford to pay on car insurance and to protect yourself from possible future financial crises. Budget Insurance not only offers low car insurance premiums but also wants to help you make informed choices.  In this article, you can learn the basics of car insurance, what happens if you don’t have car insurance, and what to consider when calculating the amount of car insurance cover you need. 

Understanding car insurance basics

A car accident or collision can happen in a split second and often when you least expect it! It can be costly to repair a damaged car, which is where car insurance offers you the financial protection you will need to get back on the road again. 

There are three common types of car insurance plans: 

• Comprehensive car insurance

• Third-party, fire and theft 

• Third-party only

These plans differ in the level of coverage they offer. Comprehensive insurance offers the most robust range of cover, while third-party only provides cover in the event of liability for third-party claims. 

What happens if you don’t have car insurance in South Africa?

If you’ve ever wondered if you are legally required to have car insurance, the answer is no. Car insurance is not a legal requirement in South Africa. However, Budget Insurance strongly recommends investing in an insurance plan to provide financial and legal protection in case of loss, damage or liabilities.

Consider the case of John, who decides against purchasing car insurance due to the additional cost he would have to pay out each month. John thinks he doesn’t really need it because he is a careful driver. Unfortunately, one day while driving, he loses control of his car and crashes into another vehicle, causing significant damage to both cars and injuring the occupants. The implications of this car accident include the following:

• Financial liability. Without car insurance, John will have to rely on his savings to cover the cost of the accident and damages to the third party’s vehicle. 

• He can also be held liable for any medical expenses the driver and passengers in the other vehicle suffered. 

• Limited resources. Because John doesn’t have enough savings, he can’t afford to fix the damages to his own car.

Unfortunately, John is not the only car owner to face these challenges. Anyone without car insurance can face the same issues and more. 

Calculating car insurance in a few easy steps

You can work out how much car insurance cover you need by following these easy steps:

Step 1: Evaluate your financial needs

Understand your financial needs and resources. This will guide you regarding what car insurance cover you can afford. The first step for determining your financial needs is drawing up a budget[1]. Budgeting involves listing your expenses, item by item, and your income. When finished, subtract your total expenses from your income. The result you get is either a surplus — income minus total expenses is positive — or a deficit — total expenses exceed income.

If you have a deficit, you’ll need either to earn extra money or cut out some of your unnecessary expenses and assign funds to priority items. 

Step 2: Assess your risk factors

When determining how much car insurance cover you need, pay attention to the risk factors that affect you. Ask yourself some of the following questions: 

• Crime rates: Are you located in an area with a high rate of smash and grabs, hijacking or car theft? 

• Driving habits: Do you drive regularly or infrequently? 

• Road conditions: Are the roads you use in poor condition? Will potholes damage your vehicle? 

• Vehicle value and condition: Are you driving a brand-new, premium car or a mid-range second-hand vehicle? 

Step 3: Determine the right level of car insurance cover

There are a number of factors to pay attention to, including balancing affordability with adequate protection, repair or replacement of your vehicle if it is written off or stolen, medical expenses and third-party liability claims.

The easiest way to calculate adequate protection is to get insurance that covers the retail value of your vehicle. Since the premium is higher for this type of cover, you need to ensure you can afford it. Otherwise, consider taking cover that protects your vehicle for its market value.

If calculating car insurance cover sounds like a complicated task, there’s a simple way out: speak with a trained Budget Insurance car insurance broker for assistance. 

Get some of the best car insurance quotes in South Africa

What do you do if you want the best car insurance plans? You go to one of the best insurance providers in South Africa. Budget Insurance offers top-quality, affordable car insurance plans to suit your needs and budget. Simply request a free and no-obligation car insurance quote.