Sorting the car insurance myths from the facts

Small cars receive lower premiums. Red cars are the most expensive to insure. Insurance companies base your premium on your credit history. These are just some of the common statements you’ve probably heard about car insurance in your lifetime. But how true are they?

We’re here to sort the fact from the fiction when it comes to what affects your car insurance premiums. Find out what really goes on when we give you a car insurance quote and maybe you’ll learn something that will help you find car insurance that’s in budget in the future.

1. Small cars cost less to insure

While there are a wide range of factors that affect insurance costs, the type of car you drive is one of the biggest. The more a car might cost to repair or replace if it is involved in an accident, the higher your insurance premiums will be.

While SUVs regularly have the latest features and comforts, that doesn’t necessarily mean they’re more expensive to insure. Because of their size and often excellent safety features, they will usually take less damage in an accident than a smaller car would. This means the costs to repair them would be lower. In this instance, only if the car was to be written off would it cost an insurer more.

Verdict: myth 

2. Red cars are the most expensive colour to insure

The idea here is because red cars are rarer than white and silver cars, they’re more expensive to insure as the paint costs more. The logic is correct but the conclusion is wrong. In South Africa, many car insurance companies will factor your car’s colour into their quotes. They will, however, be looking for unusual colours, like pearlescent white or matte green, rather than plain old red. These special colours are harder for repairers to match correctly and requires more expertise to do properly. That’s why your cream, mother-of-pearl-colored car could drive your premiums up.

Verdict: myth 

3. Insurance companies look up your credit history when quoting

You might have heard this one and not believed it. After all, what does your credit history have to do with your insurance? Remember, insurers base your car insurance quotes on your level of risk, and it’s not only the risk of you getting into an accident that insurers look at.

If your credit history is a bit sketchy, you could be seen as a higher risk for not paying, thereby increasing your premiums. The good news is, if you look after your credit record (by paying at least the minimum balance on your bills on time every month), you can benefit from lower insurance costs.

Verdict: fact

4. Car insurance policies only cover one driver

At Budget, every Car Insurance policy has a regular driver – the person who uses the car more often than anyone else. However, that doesn’t mean nobody else can ever drive the car. Let’s say you take out cover for yourself but you expect your child to occasionally use your car too, you can let us know and we’ll take note of it. If your child then has an accident while driving your car, it won’t affect whether or not your claim is approved. The only difference is that you may need to pay additional excesses when you claim. 

Many mistakenly think their insurance covers them as individuals but it actually covers the vehicle. So if your neighbour crashes your car, you’ll need to contact your insurer, not theirs.

Verdict: myth

5. Personal items stored in your car are automatically covered

Picture this: You stop at the shops on the way home from work for some bread and milk. You leave your laptop lying on the passenger seat. When you come out of the store, your window is smashed and the laptop is gone. But it’s not a problem because you’re insured, right? 

Not quite. Your car insurance covers you for your car only, not the items you keep inside it. If you want to insure your valuables you’ll need to take out a portable possessions insurance package. However, be aware that you still need to do your best to prevent theft. That includes not leaving valuable items that are tempting for criminals in plain view. With Budget, you would need to keep the laptop locked in the boot of your car in order for it to be covered. In fact, the boot is the most secure place in your car, so make sure to leave all the valuables you don’t take into the shops with you in there, including your designer sunglasses. 

You also need to make sure your car locks properly before leaving it, because remote jamming is real and if we can’t see evidence of a break-in, we might not pay out your claim.

Verdict: myth

6. Car insurance doesn’t cover wear and tear

At Budget, our Comprehensive Car Insurance covers a wide range of eventualities – theft, accident, and even third-party damage. However, it doesn’t cover general wear and tear. As they age, the parts in your car are going to need repairing and replacing – it’s just what happens when you own a vehicle, like paying for petrol and topping up with oil. Make sure you factor servicing and unexpected breakdowns into your budget to stay on top of these costs. 

Only if a car part is worn and it causes you to have an accident (and you weren’t aware of it) will we pay out a claim. 

Verdict: fact

7. The minimum insurance is enough

This is a tough one. In South Africa, it’s not a legal requirement to have car insurance like it is in many other countries. Various reports place the number of uninsured vehicles on the road at anywhere between 65% and 75%.

So, for most people, having even the most basic cover (which is usually third-party only car insurance) is enough, because it’s better than nothing. At least in this case, if you cause an accident, the affected people can get their cars repaired without having to claim from their insurance or pay out of their own pocket.

However, if you want to get cover for nearly every scenario on the road, you’ll need comprehensive cover.

Verdict: it depends

8. Locally manufactured cars cost less to insure

In South Africa, many of our most beloved car brands have factories that manufacture their popular models in the country, and car insurance companies love it. That’s because it’s cheaper to find replacement parts from local manufacturers than it is to import them from overseas. So, when you’re looking for a new car, check out which ones are made right here in South Africa so you can benefit from a cheaper car insurance premium.

Verdict: fact

9. Older cars are cheaper to insure

If a car isn’t worth that much anymore, it makes sense that insuring it should be cheap, right? Not always. Because every car model is different – each one has its own safety features, specs, mileage, condition – it’s not always the case that older cars are cheaper to insure. In fact, some older cars might cost a lot to repair if they’re damaged in an accident, which would inevitably drive up the cost of car insurance. It’s impossible to say that new cars cost more to cover and older cars cost less – it varies from car to car.

Also, keep in mind that older cars are usually easier to steal – new cars are always coming out with more advanced safety features that make stealing them a much harder task.

Verdict: it depends

10. Insurance covers your outstanding loan if your car is written off

Unfortunately, this isn’t necessarily guaranteed. If your car is financed, it depends how much you still owe on your car. When you take out car cover, you will usually insure it for its retail, market, or trade value. Normally, the highest value you can insure for is the retail value, while the lowest is the trade value. Having said that, with Budget, you can insure your car for BetterCar Value, where we replace your car with the same model but one year newer if it’s written off.

So, depending on how much your car is insured for, you may or may not be able to pay off the outstanding balance on your vehicle finance. If you want to ensure that your loan will be paid off should something happen to your car, you can take out Auto Top-Up with us. This will make sure any remaining money still owed after your payout is paid off. You can also add Deposit Protector, which will pay you out the deposit amount you paid too! 

Now that you know your facts from your fiction when it comes to car cover, get a Car Insurance quote that will help you stick to your budget.

Affordable, ‘cos you can’t afford not to!

Budget Insurance is an authorised insurer and FSP. Terms and Conditions online.

Sources: News24; AP News

The information in this article is provided for informational purposes only and should not be construed as financial, legal, or medical advice.