Insurance forms part of many grudge purchases that adults are required to make throughout our lives, with the insured only reaping the benefits of the product when something goes wrong. Our monthly instalments provide some peace of mind, with the knowledge that in the event of the unlikely, our assets will be covered.
When financing a vehicle, you are now required to have comprehensive insurance in place before taking delivery of your new vehicle. Let’s explore what car insurance is, the different types of vehicle insurance and indeed, why it is important.
Insurance in South Africa
While it is not compulsory to have vehicle insurance in South Africa, financial institutions have made insurance compulsory for those seeking finance on a new or pre-owned vehicle. Unfortunately, some owners cancel their insurance after taking delivery, which may explain why many vehicles on local roads are uninsured. In a country with a high accident rate and an exceedingly high number of vehicle thefts and hijackings, it is certainly favourable to have insurance on your vehicle.
What is car insurance?
In very basic terms, car insurance is a contract that you, the insured, enter into with an insurance provider that covers the insured against loss, accident damage and theft. The contracts detail an exchange between the two parties where the insured pays the insurer a monthly premium and in return receives cover for their vehicle.
What are the different types of insurance?
There are three types of vehicle insurance available to drivers
- Third-party insurance- If you are less concerned with your property but want to make sure that, in the event of an incident, that you will not have to pay for the damage done to someone else’s asset, third party insurance provides this cover. Some drivers opt for this to avoid potential legal action taken against them in the event of an accident and, of course because this is the cheapest type of insurance available.
- Limited cover insurance- The limited cover policy provides the third party coverage as listed above, but will also cover your vehicle in the event of theft, hijacking and fire damage.
- Comprehensive insurance- As its name suggests, this type of insurance includes the areas specified in the third party and limited cover spheres but also adds cover for accident damage and total loss.
