Too many drivers think that the cost of insuring an older car isn’t worth it. But with around 800,000 vehicle accidents* reported in South Africa each year, there is an enormous risk in driving without insurance to protect yourself from liability should you be held responsible for a car accident.
“Many first-time buyers and owners of older cars often question if insurance is worth it. They often assume that a car accident won’t happen to them, but the reality is that around one in five drivers are expected to be involved in an accident in any given year. That means most of us will be involved in an accident once every five years, though it can even happen more often,” says Ernest North, co-founder of car and home insurance platform, Naked. “Being held responsible for an accident can have a big impact on your finances, even if it’s just a minor bumper bashing in a mall parking lot.”
“Whether you drive a brand-new luxury car or a 15-year-old set of wheels, the risks of being uninsured are very real,” says North. “In today’s economic climate, many people are trying to save money wherever they can, but skipping insurance entirely can be a costly mistake. Even the most cautious drivers can end up being held partly or fully liable for an accident.”
Even if you’re just partially responsible for an accident, you could be liable for hundreds of thousands of rands or even millions in damage to other vehicles or property. “In worst case scenarios, you could face multi-year repayment agreements with insurers or even attachment of your assets if you can’t pay. These kinds of debts can drain a person’s disposable income for years,” warns North.
Comprehensive versus third-party: know your options
“Many people believe that insurance for older vehicles isn’t affordable or worthwhile,” says North.
“However, it is important to understand the difference between comprehensive and third-party only insurance, and to know that you have options.”
Comprehensive car insurance includes cover for any damage to your own car, theft of your car, as well as damage you cause to other vehicles or property. For many well-maintained older cars, comprehensive car insurance offers good value and can help you get back on the road again. It could, for example, go a long way to paying for the panel-beating or contributing towards a big deposit on a replacement car.
Third-party insurance only covers damage you cause to someone else’s vehicle or property in an accident that was deemed to be your fault. For low-value, older cars, this might make more financial sense, especially if you are able to replace your own car, and your main concern is avoiding the risk of a massive R10 million claim for damaging a high-end vehicle like a Ferrari.
Affordability is a barrier, but digital is changing that
According to North, one of the biggest barriers to wider insurance uptake is cost. Traditional third-party cover often starts at R200 per month, which is out of reach for many consumers. “But digital platforms are changing that through automated processes reducing the cost of offering insurance,” says North. “With Naked, for example, drivers can get R10 million in third-party cover from just R70 per month, with no excess. This is a small price to pay compared to the costs of an accident if you’re held responsible.”
“Driving completely uninsured is risky, not just for you, but for everyone else on the road,” says North. “At the very least, third-party insurance gives you peace of mind and protects you from debts that could take years to pay off. This is why third-party insurance is mandatory in many other countries as a means to protect all vehicle drivers from unnecessary financial losses. But in South Africa, people typically buy comprehensive insurance or none at all.”
North offers some tips about how to choose insurance:
- Make sure you understand the difference between comprehensive and third-party liability cover.
- Think about your ability to pay for costs such as repairs or replacement of your car out of your own pocket when weighing up your options.
- Seek quotes. With an online insurance platform like Naked, you can experiment with options such as different excess levels and comprehensive versus third-party insurance to get the right cover for your needs and budget.
- Remember that the insurer considers factors such as your age, accident history, where you live and store your car, and driving experience, in addition to the age, brand and model of your car to determine your premium.
- Always read the wording for policies you are considering.
