Does the Depreciating Value of Cars Affect Your Car Insurance Price in South Africa?
Does it seem unfair to you that you’re paying the same premium now for a car that is worth much less? Find out how insurers determine your premium and if a car’s depreciating value influences this cost.
Do you think cheap car insurance premiums are important in today’s economic climate? Many South Africans would agree with you. It may seem unfair, then, to pay the same monthly costs for a car if its value is dropping.
Find out how the cost of repair and minor damage play a role in your premium costs. You may be surprised to find that your insurance price is influenced by depreciation in a surprising way.
How Much Does Car Insurance Cost?
The answer depends on where you live, your driving record, and other factors. The cost can also be influenced by the type of auto insurance coverages you have purchased. For example, third-party insurance alone is usually more affordable than comprehensive insurance cover.
The type of vehicle you’re insuring can also influence the costs, as well as what it is being used for. A comprehensive car policy for business often costs more than one for personal use, for example. The best way to find out what rates you can expect is to shop around.
You can compare insurance quotes from different insurers on our site. Just fill in the form at the bottom of this page to get an obligation-free quote from the ideal insurance company for your needs.
Do I Have to Get Car Insurance in South Africa?
Car insurance is mandatory in most countries. Besides for protecting against financial losses, it also provides coverage for medical expenses, legal fees, and even lost wages. In South Africa, it is not mandatory but highly recommended since the costs of vehicle repair or replacement when an accident occurs can be extremely high.
Many an insurance company will also provide added benefits such as roadside assistance in addition to cover for repair costs and accidental damage. If you get a comprehensive car insurance plan, it usually also covers theft, fire, natural disaster, malicious damage, and third-party liability. The financial protection you get for a nominal monthly premium is usually well worth the cost.
What Determines My Car Insurance Premium?
Car insurance premiums vary widely depending on your location, age, gender, driving history, and vehicle type. That means you might pay less or more than average depending on how insurance providers determine the price. A comprehensive car insurance policy usually costs more than a basic policy because it covers more perils and offers more benefits.
How Do Insurance Companies Determine My Monthly Premium?
Insurance companies use a variety of methods to calculate how much they’ll charge you for auto insurance. Some use actual data about drivers’ risk levels; others rely on estimates that are based on things like your zip code, credit score, and driving history. This information helps them put together a risk profile.
In South Africa, your risk profile is the most common way for your insurance premiums to be determined by insurance companies. Often, the insurer will put details about which elements can influence your insurance costs into the insurance policy documents. For example, they may require you to park your car in a locked garage and to install a vehicle tracking device.
Even the form that pay-outs or claims take can influence costs. For example, when you cover your car for its market value (the amount it would cost if someone bought it now from you personally), it can often cost less than cover it for its retail value (how much a dealership would charge buyers for your car). Lastly, a lower excess often means higher monthly premiums.
You can find more about which factors influence your car insurance premiums on our blog.
Does the Depreciating Value of My Car Influence My Premiums?
Yes, your car’s depreciating value influences your premium costs, but not in the way you think. Insured parties often assume that the biggest determining factors in the risk profile of their vehicles are theft and totalling your car. But write-offs are rare financial liabilities compared to repair costs and the costs of replacing parts after an accident.
Insurers say that most of the premium would actually go towards covering the vehicle against accidental damage. Up to ninety percent of cars that have been in an accident get repaired and not replaced. Another sizable percentage goes towards covering liabilities, such as repairing the car of the other person involved and paying liability claims.
Add to this the ever-increasing costs of repairing vehicles and finding parts, and you can see why your insurance premium may actually go up year-on-year, not down. Even though your car is worth up to 15% less each year, the accident risk profile remains the same. Sometimes it can even get higher as the vehicle ages.
That said, there is one insurer in South Africa handing out monthly premiums that decrease as your car ages.
What About the King’s Car Insurance?
You may have heard that King Price’s premiums get less each month because of the depreciating value of the insured vehicle. This depreciation car insurance is popular, but it comes with terms and conditions. You can learn more about the King’s Car Cover on our site.
Auto insurance policies can sometimes seem overwhelming to sort through and choose between. You can leave the struggle up to our system instead of reading through insurance documents and quotes. Simply fill in the form below and our high-tech system will match you with the ideal insurer for your needs.
Insurance.co.za Content Team
We’re a specialist team of insurance and finance copywriters and content producers. The Insurance.co.za Content Team is a flexible and dynamic team. Hence we publish our content under the Insurance.co.za brand name rather than our personal names.
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