What are the factors that change or affect my car insurance premium?

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Factor #1: Type of vehicle

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The make, model and year of a vehicle can affect the cost of car insurance.

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High-performance sports cars, high-end luxury vehicles, and electric vehicles are more expensive to insure than other vehicles.

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Expensive vehicles are more costly to repair or replace in case of a total loss.

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High-risk vehicles (VW Polo, Toyota Fortuner and Hilux, Nissan NP 200 and Ford Ranger bakkies) also attract a higher insurance premium because they are popular targets for hijackers.

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The South African Police Service’s (SAPS) latest crime statistics revealed that 6 149  carjackings occurred across the country between July and September 2022 – a 23,6% increase from the 4 973 carjackings reported over the same period in 2021.

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Separate data also showed that white vehicles were disproportionately targeted, along with silver-grey vehicles.

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So is the solution to go out and buy a new car simply because yours tops the highest-theft-risk list?

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No, but you can add safety features to your car to help lower your premiums.

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• Install a tracking device.
• Install an immobiliser.
• Have anti-smash-and-grab.
• Add Window tints.

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With these measures in place, you may qualify for discounts on your car insurance premium.

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Factor #2: Coverage level

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The cost of car insurance is also dependent on the amount of coverage and the type of policy you select. Your insurance company must pay a higher fee if you carry a more extensive coverage option.

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Different insurers offer different packages, but typically, the type of insurance you can get is:

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• Liability Car Insurance: Liability Insurance coverage, also known as Third-party coverage, helps settle the costs of the other driver's car, damage to property, bodily injuries, and accidental death if you're at fault in an accident.

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• Third-party, fire, and theft insurance: This insurance coverage is as it states; your insurer will cover your vehicle against any of these specific disasters.

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• Comprehensive Car Insurance: Comprehensive coverage typically comes with a higher premium because this type of car insurance covers your vehicle for basically everything.

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It offers collision cover, third-party liability, fire damage, weather damage (hail, floods and wildfires, for example), theft, and vandalism.

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Also included are added benefits such as car hire, emergency roadside assistance and emergency accommodation. Comprehensive Car Insurance also offers credit shortfall to assist with car loan payments.

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Naturally, the more comprehensive your coverage, the more your insurance premium will cost you monthly.

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To pay lower premiums, you can always opt for a lesser coverage option, but keep in mind that this comes at the cost of the car’s safety and your peace of mind.

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Factor #3: Age and gender

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Age plays a role in determining the car insurance premiums you’ll pay; the younger a driver, the more inexperienced they usually are behind the wheel and therefore pose a higher risk to insurance companies.

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According to statistics collated by the Road Traffic Management Corporation (RTMC), 8 547 young people between 21 and 34 perished on South African roads between 2019 and 2021.

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Reckless and negligent driving is a daily occurrence among young drivers, which puts other road users at risk of being involved in road traffic accidents.

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Other behaviours observed in the youth that leads to accidents include

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• Failure to Wear Seatbelts.
• Drunk Driving.
• Distracted Driving.

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Due to the alarming number of casualties, insurers consider drivers under 25 particularly high-risk, reflected in their high premiums.

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This next factor might come as a bit of a surprise to some drivers, but gender does affect your car insurance premiums, and for once, women are victorious in the great gender debate.

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The car insurance space must have undercover feminists working within the industry because female drivers generally pay lower premiums than their male counterparts.

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Insurers have observed that teenage boys and young men are more likely to get in car accidents and are more likely to speed or take other unnecessary risks behind the wheel.

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If you’re a man currently reading this, PUT THE PITCHFORK DOWN, this discrepancy does even out for older adults.

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There’s not much you can do about your age or gender, and we wouldn’t recommend corrective gender surgery simply to pay lower premiums.

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But we live in a democracy, so if it’s important to you, it’s well within your rights. Your body, your choice.

Factor #4: Location

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Where a person lives can affect the cost of their car insurance.

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The cost of living isn’t the only thing that comes at a high price tag in urban areas; insurance premiums are also higher than in rural areas because the former experiences a higher volume of incidents such as accidents, theft and vandalism.

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Further factors found in urban areas are

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• A larger volume of vehicles on the roads increases the odds of an incident occurring.
• Busy lifestyles contribute to speeding and frustrated driving behaviour.
• A larger volume of unlicensed drivers are on the road.

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In addition to the general area, the specifics of where the vehicle parks greatly influence your premiums.

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A car parked in a secure environment, like a complex with a locked garage and a security guard, is far safer than a car parked on the street.

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Lastly, the greater the distance between where you work and where you live can also cause your car insurance to soar. The more kilometres you travel, the more time you spend on the road, which increases the likelihood of getting into an accident.

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Again, we don’t recommend taking drastic measures by uprooting your entire life and moving to a different area, all in the name of cutting insurance costs.

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Simply parking the vehicle in a secure space, under lock and key, can make all the difference between affordable and inflated car insurance premiums.

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Factor #5: Driving history

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An individual's driving history, including any accidents or violations, can affect their insurance premium.

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If you’ve been in multiple accidents, your car insurance cost will be higher than someone who has not. And if you're a new driver and have not had insurance, you'll also pay more due to the lack of a driving record.

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The number of claims filed, the frequency, and the cost of accidents covered in the past all play a role in your present car insurance premium.

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Inconsequential incidents like scratches, a dent or even a cracked windshield are minor compared to back-to-back car write-offs.

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Therefore numerous, hefty claims in a short period signal more of a red flag than you’d find in a toxic relationship. Individuals with a poor driving history may find themselves paying higher premiums because of this.

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And similar to the factor mentioned earlier, someone who has a long commute to work or uses their vehicle regularly may pay more - since more mileage means more risk exposure.

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You can decrease the cost of your insurance premiums with programmes like usage-based insurance, using public transport, or joining a lift club.

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Factor #6: Credit history

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Many car insurance providers consider an individual's credit score when determining premiums.

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A poor credit score is a powerful predictor of your financial behaviour, something insurers need to know. After all, they need compensation for their service.

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Therefore, a good credit score means you’re less likely to default on your monthly insurance premium, making you less risky to insure.

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Any bad judgements, being placed under administration, or being declared bankrupt within five years can increase your insurance premium and might even lead to some insurers refusing to offer you coverage entirely.

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A poor credit score may indicate to the insurer that you’re unreliable when making your payments, meaning you might appear as a high-risk borrower.

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The good news is that your credit score can be improved by

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• Paying your bills on time: Late payments can negatively impact your credit score, so you must ensure that your accounts are paid on time.

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• Keeping your credit card balances low: High credit card balances can indicate that you are overextended and may have trouble making payments.

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• Diversifying your credit mix: A mix of different types of credit, such as a mortgage, car loan, and credit card, can be beneficial for your score.

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• Not closing any unused credit accounts: Closing old credit accounts will reduce the total amount of available credit, which can lead to a lower credit score.

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• Seeking professional advice if needed: If you need help with improving your credit score or have a specific credit-related problem, consider seeking advice from a financial advisor or credit counselling service.

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Factor #7: Driver’s licence

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A driver's licence can affect insurance premiums in several ways.

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Firstly, much like your age, the age of your driver’s licence can have a massive impact on your insurance premiums.

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A relatively new and freshly obtained driver’s licence can be seen as an indicator of an inexperienced driver, even if you’ve been (illegally) driving for years before actually getting a licence.

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Stats also indicate that drivers who recently obtained a driver's licence are more likely to claim than drivers who have had their licence for many years.

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If your licence is new, there’s a good chance you’ve probably never had continuous car insurance, which again puts the cost of your car insurance on the higher end of the spectrum.

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Lastly, your licence code can also influence your car insurance premiums.

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If you have a Code 10 (C, C1) licence, the premiums will likely be slightly higher than a Code 8 (B, EB) licence. The yard test for a Code 8 licence is more thorough than for a Code 10 licence.

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You can improve this factor by taking out car insurance sooner rather than later, and the next time you shop around for a quote, you may find your premium will be lower.

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Factor #8: Excess

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Okay, so we might’ve stretched the truth a little; this last factor will probably not come as much of a surprise. It’s pretty logical if you think about it.

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Excess is the 8th and final factor that can cause the cost of your insurance to skyrocket. The higher the excess you choose, the lower your car insurance premium, and vice versa.

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When you opt for a higher excess, you are telling the insurance company that you are willing to accept some financial responsibility in case of a claim.

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In return, the insurance company will award you a lower premium because the insurer is taking on less risk by having you take on more of the financial burden.

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A lower excess, on the other hand, means that in the event of a claim, the insurance company will have to cover more of the cost, and as a result, your insurance premium will be higher.

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So if you scratch your insurer’s back, they will do the same for you.

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And no matter how high your excess, this amount is usually a small fee relative to the actual claim, especially for write-offs or accidents that cause significant damage to your vehicle.

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In the long run, you’re paying less with your excess than what the damage could have been without any kind of car insurance in place.

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A word of caution: it’s not wise to take out car insurance with a high excess if you know that should an accident happen, this is money that you will not have readily available.