Understanding car insurance coverage
January 12, 2019
Car insurance is not a commodity that one simply buys over the counter and walks away. It’s a lifetime commitment, or at least, in part. Therefore, it is important that a policyholder understands what auto insurance is. In today’s society with so many car accidents, it is crucial to have car coverage insurance.
The auto insurance companies need a lot of valuable information about you before you can buy insurance. This information is used to draw up the person’s risk profile and hence, calculate the premiums that the person will pay.
Some of the information required by insurance companies include:
- The person’s full name and age
- Vehicle model, its year and mileage
- Vehicle use (personal or commercial)
- The number of years that the person has been driving
- Traffic violations
- Driving history
They expect the prospective policyholder to provide honest and truthful information.
When a person successfully purchases auto insurance, he/she is issued a certificate of automobile insurance. The policyholder is expected to regularly read the certificate so that he/she can familiarise with his/her insurance coverage.
The insurance certificate includes the following information:
- The insured vehicle(s)
- The type of insurance purchased
- The period of coverage
Auto insurance is meant to give a policyholder a lifeline in case he/she is in a car accident. The insurance can cover the cost to repair the damaged vehicle(s) or pay medical costs for people injured during the accident.
Auto insurance can cover a policyholder against the following:
- Personal injury
- Damage to the policyholder’s vehicle
- Damage to someone else’s property caused by the policyholder
- Third party damage costs
When a person buys an insurance policy, he/she enters into an agreement with the insurance company. The agreement stipulates that the policyholder pays a premium periodically and the company pays for expenses related to a vehicle accident.
They can insure a policyholder for a certain period. When the time expires, it is the duty of the policyholder to renew his/her policy or risk losing the insurance coverage.
South African law on car insurance
Unlike many countries, the South African law is liberal and does not require each motorist to have insurance. This is in part due to the Road Accident Fund (RAF), which is more like an automatic third party insurance cover that covers motorists.
The auto insurance industry as a whole is not immune from laws. It is governed by laws through several acts passed in Parliament. Some of the Acts include:
- Short Term Insurance Act 53 of 1998
- Policyholder Protection Rules of 2004
- Financial Services Ombud Schemes Act 37 of 2004
- Financial Advisory and Intermediary Services Act 37 of 2002
Since the insurance companies offer financial services, they are regulated by the Financial Services Board.
Approximately 35% of South African motorists are insured. This is quite a low figure considering the vast number of reputable auto insurance companies operating in the country, not to mention the fortune that the companies spend on advertisements and informing the public on the benefits of buying auto insurance.
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All info was correct at time of publishing