Car insurance cover is essentially a contract in which an insurance company assumes financial responsibility for any loss the insured may incur through damage or theft to his/her vehicle. The bottom line is that you should always read your car insurance policy and schedule, and make sure that you clearly understand the terminology, terms and conditions as well as any exclusion clauses.

Golden rules of car insurance are:

  • Know the promise you’re buying: When you buy car insurance cover you buy a promise. For years or even decades you may pay your insurer to say: “In certain circumstances that may never arrive, I will give you certain things.” You need to be sure of what these circumstances are and what you will gain from the cover.
  • Keep the promise you are making: When you buy your insurance you give your insurer much personal information such as your habits and the ways you will use the items you are insuring. If the information is wrong, sometimes even a little bit wrong, the insurer’s promise won’t hold up.
  • Remember this key truth: It is the car insurer’s job to pay you what you are due and not more.

It is important to understand why you are paying a specific premium to insure your car. When your car is stolen, damaged or written off in an accident, the insurance provider will pay out an amount based on a variety of values that are determined beforehand.

These factors include:

  • The model and make of your vehicle that is insured, the age of the vehicle as well as the condition that it is in, and the replacement value of the vehicle in question. 
  • If your car is damaged, the normal procedure is the insurer will establish whether the quote to repair your car is reasonable and will ensure that all the damage is repaired. Generally, the insurer will write-off your vehicle if the cost of repairing your vehicle exceeds 70 percent of its value. In this case, the insurer will pay out the vehicle's market value or retail value, depending on the terms and conditions of your contract. 
  • Market value, which is what most insurers pay out, is the average of the retail and the trade value. Retail value is the price you pay to buy your vehicle, whether new or second-hand, from a dealer. The trade value is what a second-hand dealer will give you if you trade in your car. 
  • If your car insurance cover pays out market value, the amount will not be enough to replace your car with a new one.

In the market for car insurance cover? Get a quote now from Moneyshop.co.za and protect yourself financially should something happen to your vehicle.