The Necessity of Vehicle Insurance

Who needs it?

Not everyone may need vehicle insurance, but the wise and prudent motorist will maintain a policy for the protection of their car, and the protection of themselves. This two-sided view of insurance is important when determining what types of policies are available, and what the insurance will cost you.

There are typically two facets of automobile insurance. One pays for damage or injury to others, the other pays for damage or injury to the policyholder.

Insurance For Injuries

The Road Accident Fund Act provides insurance cover for injuries sustained in car accidents in South Africa for both the innocent party and the at fault party, with limitations. With this statutory benefit available, the need for liability cover is minimized for automobile owners. Additionally, if someone is injured in a car accident while on work duty, their medical bills will be covered by the Compensation for Occupational Injuries and Diseases Act, which would take priority over any benefits available through the Road Accident Fund.

Insurance For Damage To Your Car

The other aspect of insurance that may be important to you involves physical damage cover for your car. It makes sense to buy insurance for your car given the financial risk of loss in the event of damage. From an economic standpoint, the cost of paying for insurance is very small compared to the risk of having to pay in full for a collision repair bill, or worse yet, the risk of having to replace a vehicle on your own.

If you borrowed money to purchase your car like most people, you are required to have the car insured. Lenders make this requirement to protect their interest in the vehicle, which acts as security for the loan. As long as the vehicle maintains its value, the lender's interests are protected. In the event that the car is damaged and the owner fails to make proper repairs, the value of the car is then diminished to a point that is likely below the current loan balance.

Car insurance policies typically have a deductible, which is an amount that you have to pay directly before you receive insurance benefits. This is usually a nominal dollar amount, which varies by policy, and can usually be chosen by the policyholder. Policies with higher deductibles cost less than policies with lower deductibles.

Vehicle insurance will typically cover damage from a collision with another car or some other object. Other types of damage are also covered such as fire, hail, or theft. Coverage for these other types of damage will usually cost additional premium.

Another item to consider when comparing automobile insurance policies is coverage for items that are installed in the car, such as radios, cd players, or other add-on accessories. Coverage for these items is usually not included in a basic policy and would have to be added for additional cost.

Insurance For Damage To Things Inside Your Car

Your auto insurance policy will not cover personal items carried with you while in the car like clothing, jewelry, or electronics. If your policy contains a liability provision, which pays for injury or damage to the property of others, it would pay for damage to someone else's personal things if they were damaged in an accident that you caused through negligence.

In the end, it pays to do your research and speak with qualified insurance professionals when considering an insurance policy for your vehicle. They will be able to advise you on the options and costs of your policy and can make sure that all of your contingencies are considered in the decision making process.