Insurance and Knowing the True Value of Your Car

    August 21, 2018

    All South Africans need to take out car insurance when they make use of bank finance to buy a vehicle. To do that you need to know the true value of your car.

    If your car is paid up or you pay cash for your car, car insurance isn’t mandatory. In fact the AA tells us that only 3 in 10 cars in South Africa are insured. They go on to say that as a responsible vehicle owner, you should at least research the different options and buy a little cover instead of driving without any insurance at all.

    Having insurance ensures you have compensation for injuries and damage from accidents involving a road vehicle.

    Value of Your Car Determines Premiums

    But how much should you be paying each month? Yes, your insurance premium is based on things such as your age, gender, where you live, your driving history, what you use your car for and what type of car you drive.

    Correct Value of Your CarYour car’s value will also in all likelihood affect the type of cover you take out – 3rd Party, 3rd Party Fire and Theft or Comprehensive Insurance.  Some insurers won’t cover a higher-value car unless it’s insured comprehensively.

    There are many owners of cars who simply take out car insurance without taking a hard look at their car, and finding out what its true value is. The end result is you paying to much ortoo little, ending up with being surprised or shocked when claim time comes.

    The idea is to think about how much you’ll be paid out if your car is damaged or stolen. Car insurance can be confusing and many a car owner has had a shock to discover that they are paid out far less than what they expected.

    Understand the different types of values against which you can insure your car –

    ►Retail value:

    When you buy a car from the dealer, this is the actual price of the car. It’s the highest amount for which you can insure a car. With this insurance your premiums will be higher, and unlike market value, they won’t reduce each year.

    ►Market Value:

    If you sell your car privately, the market value is the price you could sell your car for. It comes from a handbook known as the Auto Dealer’s Digest. The equation is market value = trade value + retail value divided by two. So if your car was R300 000 for instance, and the trade value is R220 000, the market value would be R520 000/2 = R260 000.

    ►Trade Value:

    This is the lowest value for which you can insure your car.  This is the book value of a car. Motor vehicle dealers keep a reference list, known as the book value –  what a car is worth to them. This is the amount you’ll be paid if you trade in or sell your car to the dealer. So when the dealer sells a 2nd hand car, they pay the book value, adding their own mark-up which results in the selling amount. You pay lower premiums with trade value, but then it amounts to a lower payout too.

    Check Your Car’s Value Every Year

    Essentially you should be doing an annual check on the retail value of your car. The reason for this is that each year your car depreciates in value. This means that you could for instance be over insuring your car and paying a much higher premium than you should be.


    Apply online for car insurance. Complete and submit the form on this page. We will get back to you with an estimate of your car’s value and a vehicle insurance quote

    All info was correct at time of publishing