Insurance Tips For First-Time Vehicle Buyers

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There’s nothing quite like buying your first car. While it is exciting, it could also be overwhelming to address the insurance aspect of securing your vehicle against theft, loss, or damage. There are so many variations of cover and costs available.

“Without the financial experience of what insurance is all about, it’s likely to be challenging trying to unravel why the insurance quotes you receive vary so radically in premium price, the terms of cover, the excess or deductible you’ll need to pay in event of a claim, and most importantly, what is and isn’t covered,” explains Mandy Barrett of insurance brokerage Aon South Africa.

“It’s one of the reasons why getting independent and impartial advice from an expert broker is the very best financial decision you can make to ensure that your car and any extras are properly insured and that you won’t face any nasty surprises should you need to claim,” explains Mandy.

Aon provides some invaluable tips that will help you when assessing your motor insurance:

Do the insurance research before you buy a vehicle

This may affect your choice of vehicle in the end when one looks at things like affordability, service costs, parts availability, required security measures, and crime stats. There are so many aspects that affect your motor insurance, ranging from the make and model of the vehicle, through to the cost of parts and availability, whether you need car hire in the event of an accident, what the vehicle is utilised for, your driver profile and age and even your credit rating.

Be aware of the type of security precautions you will need, such as a tracking device as you need to factor the ongoing subscription cost into your monthly expenses. With all this to consider, it can be a minefield trying to navigate the terms and conditions of your motor insurance policy without the insights of an experienced eye. 

Insure your new vehicle for its list price

It is essential to check the terms and conditions of your vehicle cover. If you are purchasing a new vehicle, you can insure it for the new list price of that vehicle for the first 12 months. Thereafter, it is recommended to insure your vehicle for its retail value, which is the price the dealer will sell a second-hand vehicle to you.

Market value is the average of the difference in price between retail value and its trade-in value, in other words, what you could expect to receive from a dealer, were you to trade the vehicle in, which is why insuring your vehicle for its retail value is preferable.

Third party liability

Besides the obvious cover for accident damage and theft, your motor insurance also provides you with third-party liability cover which is embedded in your policy. Third-party liability is like having an umbrella on a cloudy day. You might not need it, but in a sudden heavy downpour, you’ll be grateful you have it. This cover protects you against a third party suing you in your personal capacity for financial loss, physical injury, or death in the event of an accident.

A passenger or any other party affected by the accident could sue you for negligence or intent, and here the legal defence costs and settlement could run into millions of Rands. Although the Road Accident Fund (RAF) exists for people injured in a road accident and is the typical route many people will take, the fund has certain limitations. There is nothing stopping a third party from coming after you for compensation, especially where they can prove trauma or emotional shock (not covered under the RAF) as a result of witnessing an accident where someone was killed or severely injured, and you were party to it, for example.

Don’t assume you are covered for everything

Certain events are not always automatically covered on a standard motor vehicle insurance agreement, such as scratch and dent cover, tyre cover, hail damage cover as a few examples. You may need to purchase these covers at an additional premium. Finding out that hail cover was excluded on your policy after your car has been damaged by hail, can hurt your pocket, financially.

Likewise, remember to specify any add-ons to your vehicle that are not standard features on the vehicle such as alloy mag wheels or a specific sound system, nudge bars and side steps, and additional lights.  These all add additional value to the vehicle and need to be accounted for in your sum insured. If they are not specified, they won’t be covered.

Limited Driving

Be sure to discuss the amount of traveling you aim to do in a year with your broker. As a result of the COVID-19 pandemic, many motorists have changed their daily routines to adapt to changed work circumstances. It effectively means that there are fewer vehicles on the roads, which reduces your exposure to everyday risks. If you travel less than 15 000 kilometers in a year, you could qualify for a premium discount on your comprehensive motor insurance policy.

“You really want to know and understand the detail of what you are covered for before the claims stage.  When it comes to shopping for insurance, there’s really no beating the help and guidance of an expert insurance broker to protect your best interests, point out all the important aspects of your cover, ringfence any exclusions or conditions and highlight what the general market trends are.

It’s unlikely to be the most riveting thing you have ever done, but getting a handle on your risks and how your insurance cover will respond in a claims scenario is likely to be one of the most financially important exercises you’ll do this year,” concludes Mandy.

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