By: Karen Rimmer, Head of Distribution at PSG Insure

Buying a car involves making a substantial financial commitment, but what many first-time car buyers don’t realise is that commitment typically extends beyond a loan repayment. In South Africa, with its high road accident ratio and high crime rate, car buyers need to prioritise being financially protected against the risks of the road. Part of taking the proper precautions involves taking out comprehensive insurance cover – which comes with its own set of responsibilities.

Tailored insurance: the issue of affordability

Commenting on this topic is Karen Rimmer, Head of Distribution at PSG Insure, who cautions first-time car buyers against forgoing car insurance as a way of cutting costs. As she explains: “It’s not unusual to hear of many cases in which parties involved in car accidents do not have insurance or the means by which to cover the cost of repairs or a complete write-off, either on their own car or for the third party involved.

Reaching a resolution after those kinds of unfortunate incidents can be extremely difficult and, in many cases, one or both parties are left without a car for the foreseeable future.”

To keep themselves protected, drivers need to remember that there is a degree of flexibility involved with taking out car insurance and working closely with an adviser can assist car owners to choose cover that is cost-effective for them. Advisers can assist clients in shopping around for quotes and help them to explore a variety of different options.

What about lease-purchased vehicles?

While many South African car buyers opt for traditional bank loans, there has also been a noticeable trend over the past few years, involving car buyers opting for lease-purchase agreements. In these cases, individuals acquire a vehicle without paying the full purchase price upfront. The agreement typically involves a series of monthly payments over an agreed-upon period, during which the driver effectively leases the vehicle but has the option to purchase it at the end of the term.

For lease-purchased vehicles, car dealerships usually insist that drivers take out comprehensive cover, which provides protection against damage to the vehicle and third-party vehicles or property. As Rimmer advises, PSG Insure has reviewed cases under which motorists initially take out this kind of cover, only to cancel it after the agreement has been concluded. This, however, is ill-advised, given that in the event of a total write-off, the driver will be left without a vehicle.

Depending on factors like the vehicle's cost or age, some individuals may choose third-party (TP) insurance, covering only damage to TP vehicles or property. Another option motorists can consider is third-party, fire and theft insurance.

The ‘D.V.U.’ determinants of a driver’s risk profile

It is also useful for South African motorists to understand which factors influence their risk profile and how these factors can influence the cost of their premium. Elaborating on this point, Rimmer encourages motorists to think of their risk profile in terms of the abbreviation, D.V.U. or ‘Driver. Vehicle. Usage.’

Aspects relating to the driver which contribute towards the cost of a premium include their age and their driving experience – typically younger, less experienced drivers pay more for insurance as they are considered as being a higher risk. The driver’s previous claims history will also be reviewed and factored into the premium charged. Motorists who have submitted numerous claims within a short period of time rather than covering the cost of damage themselves, will most likely be regarded as a higher risk.

There are also key factors that relate to the vehicle itself, which are considered by insurers. For example, the make and model of the car is an important rating factor, as well as whether the car has been modified or customised in a material way that could impact its replacement value. Insurers have also been made aware that criminals are deliberately targeting certain kinds of cars, which has resulted in the premiums for these cars being increased to cover the associated level of risk.

Thirdly, the way in which the car is used is also taken into account. At quotation phase, advisers and insurers will likely ask the motorist whether they intend to use the vehicle for personal or commercial purposes, or a combination of both. The geographical location of where the car will be parked as well as the areas to which it will travel frequently, will also be considered in terms of broader factors such as the rate of motor-related crime in those areas.

Connect with a trusted adviser

If any of the information supplied at quotation phase changes, however, motorists need to notify their adviser of what these changes are before hitting the road. One of the top reasons why claims are repudiated is when drivers do not promptly disclose important changes relating to the driver, the vehicle or its usage.

Rimmer urges motorists to develop a close relationship with their insurance adviser and to uphold clear channels of communication to ensure that as their lifestyle changes and evolves, the cover on their car is updated to reflect this. Advisers can also offer valuable insights and advice on the terms and conditions of a motorist’s policy, as well as any exclusions that may apply.

“Drivers need to be aware that although car insurance can provide an all-important safety net when the unexpected occurs, there are a number of responsibilities that motorists need to be mindful of. For example, accidents caused by reckless or illegal driving habits, as well as driving under the influence of alcohol are uninsurable risks. It is therefore important that drivers have a full understanding of the rules of the road and put safety first,” she concludes.