- Is Car Insurance a Must? Nope, it's not legally required in South Africa. But driving without it? Risky business! Imagine footing the bill for an accident all by yourself—yikes!
- Third-Party Only: While full coverage isn’t mandatory, at least having third-party insurance is a smart move. It covers the other guy’s damage if you mess up, keeping your wallet safe from a serious blow.
- Weighing Your Options: Think of car insurance like a safety net. You wouldn't jump off a high dive without one, right? Whether you're cruising in a new ride or sticking with your trusty old wheels, having coverage could save you big time.
- Peace of Mind: Car insurance isn’t just about ticking a box—it's about driving with confidence, knowing you’re covered if the unexpected happens. Better safe than sorry, right?
You’ve made it through the challenging part - securing the purchase. Now comes the question of whether the vehicle needs to be insured.
Ask any insurance provider, and the answer would be a resounding, “Yes, you do need insurance for your car.”
And for any sceptics, they don’t say this as a ploy to get you to hand over your hard-earned money.
Car insurance is necessary for consumers looking to protect themselves from the unknown, be it collisions, hailstorms or even strikes (yes, those are covered too)!
No matter how cautious of a driver you are, accidents can happen at any moment. The very definition of an accident is “an event that happens by chance or that is without apparent or deliberate cause”.
Therefore, investing in your car is always a good idea by getting it insured. So, does this then mean that car insurance is compulsory? Not necessarily.
Is Insurance Mandatory?
Car insurance in South Africa is not mandatory or a legal requirement. Car insurance is only critical if the vehicle purchase is facilitated through a loan by a financial institution or bank that requires you to have one.
Banks or other financial institutions require the car to be insured because they have a financial interest in the vehicle being used as collateral for the loan. If the car is damaged, destroyed, or otherwise loses value, the financial institution's collateral is negatively affected, resulting in a loss for the institution.
By requiring car insurance, financial institutions can ensure that the vehicle is protected and its value is preserved.
Additionally, having the car insured can help to reduce the overall financial risk for both the person taking out the loan and the institution.
Car Insurance in South Africa
Car insurance in South Africa hasn’t been compulsory since 1997, when third-party insurance (which covered injuries and damages to other people's cars or property), a legal requirement from 1942, was scrapped.
Many motorists have chosen to forego coverage entirely, with an estimated 70% of all vehicles on our roads being uninsured.
Although there have been a lot of talks and fierce debate surrounding the topic of at least making third-party car insurance mandatory, realistically, it would be a tall order for many South Africans.
Numerous uninsured drivers cite affordability as a hindering factor that keeps them from taking out insurance. That and they hardly use the vehicle or are simply none the wiser about the benefits of car insurance.
So, even if insurance became mandatory, one could wager that most South African public would probably treat it the same way they treat TV licence fees or e-tolls - ignore it completely.
Choosing to opt out of car insurance may seem like a good decision at the present moment, but it can cost motorists a hefty fine in the future.
Even the most basic insurance, like a third-party cover, can prevent situations where you are forced to pay out of pocket for any repairs resulting from an accident.
Primarily if you and the damages caused by that accident were incurred by another driver, the driver of the car you damaged and his insurance provider would then try to recover the costs from you.
Failure to pay may even result in legal action where you are sued and have to settle for a repayment arrangement - meaning your monthly income will suffer majorly for years to come.
Thus, as mentioned earlier, most insurance companies would prefer that you have at least some form of coverage.
Car insurance helps you avoid such unpleasant situations, especially for motorists with a fully comprehensive car insurance plan.
Though more expensive than other types of insurance offered in South Africa, comprehensive coverage is far from a luxury. Given the high frequency of incidents on the country's roads, it can even be argued that comprehensive car insurance is the gift that keeps giving.
Comprehensive car insurance covers accidental damage to your car and other cars, property, theft, carjacking, weather-related damage, and many other incidents.
Getting your vehicle comprehensively insured is a wise decision, given the large number of accidents and vehicle-related crimes that occur daily and steadily rise annually.
Road Accident Fund
After it was no longer required by law to have compulsory car insurance, there was still a need to protect South African motorists, and so came the introduction of the Road Accident Fund (RAF).
The RAF has provided compulsory cover to all users of South African roads, citizens and foreigners alike, against injuries or deaths caused by accidents involving vehicles within the country's borders, regardless of fault, since its inception in May of 1997.
The RAF caters for medical expenses, rehabilitation costs, loss of income for accident victims, and death benefits for their families.
However, seeing that the Fund is financed by a tax on fuel and managed by the South African Department of Transport, it doesn’t generate its funding, which means that the RAF is heavily indebted and is thus not a sustainable protection plan.
Lastly, the RAF doesn’t compensate for the costs of the damage to cars involved in the incident. Those costs are left entirely to you, and without insurance, those costs can run sky-high.
Therefore, it should be noted that the RAF is only a last resort for compensation and that victims are still encouraged to claim from other resources, such as their insurance.
Getting Your Car Insured
Getting car insurance doesn’t have to be a trying task; in fact, many insurance companies are adapting to the needs of everyday people. Consumers are always in a hurry, with little to no time nor patience for a lengthy sales pitch.
And even if time were not an issue, concentration is.
Research has shown that human beings are less focused than ever before; a study from Microsoft Corp. showed that the average human attention span is 8 seconds, revealing the shocking effect of an increasingly digitalised lifestyle on the brain.
To overcome this issue, many insurance providers offer processes without a traditional sales call. Quotes can be generated in minutes, and policies can be purchased in record time, thanks to the introduction of apps and websites.
There is not much of a question of legality regarding insurance in South Africa, so the insurance process is made that much easier.
Here are some helpful tips for getting the best deal on your car insurance:
- Shop ‘til you drop: Compare quotes from multiple insurance providers to find the best premiums for you.
- Consider your coverage needs: Determine your preferred coverage level and choose a policy that best meets your requirements.
- Maintain a good driving record: The safer the driver, the lower the car insurance premiums.
- Opt for a high excess: The higher the excess, the lower the monthly premium.
- Go policy crazy: Combining your car insurance with other insurance policies, such as home insurance, can result in multi-policy discounts.
- Keep your car secure: Installing anti-theft devices, parking in a safe location, and keeping the vehicle in good condition can all help to reduce the risk of theft and damage, potentially lowering your insurance premiums.
Considering that the cost of car insurance can be affected by various factors, regularly shopping around is recommended. Comparing quotes from different insurance providers ensures you get the best deal on your car insurance.
Car Insurance in Other Countries
Compulsory car insurance might not be a thing in South Africa, but in other countries, they do things differently.
The most basic of all policies, third-party car insurance, is compulsory in places like Australia, Germany, India, the UK, and the US.
In these countries, having third-party car insurance is a legal requirement for all motorists.
Australia: drivers must have a minimum level of third-party insurance (called the Compulsory Third Party or the CTP scheme) as a condition of registering their vehicle. The coverage protects against damages or injuries caused to other drivers, passengers, or their property in the event of an accident.
Germany: all drivers must have third-party liability insurance as a condition of driving on the roads.
India: motorists must have compulsory third-party insurance; in some cases, it covers bodily injury only or bodily injury and damage to the third party’s car.
The United Kingdom: all vehicles must be licensed and insured for damage caused to third parties and must always show evidence of insurance. However, like in South Africa, millions of motorists drive on UK roads without car insurance.
In the US, the requirement for third-party car insurance varies by state, but it is mandatory in most states.
While the specifics of the legal requirements vary between these countries, having third-party insurance is common in many countries, many more than listed above.
Therefore, it’s safe to say that South Africa may have erred in doing away with compulsory car insurance and reinstating it will have long-lasting benefits for many parties.
Conclusion
Mandatory car insurance could decrease costs for consumers with insurance and those who have yet to take out a policy.
Vehicle owners would also be better because they can now afford to repair or replace accident-damaged cars, potentially increasing employment opportunities in the vehicle manufacturing, motor repair and insurance industries.
The strain of sustaining the entire country would also be lifted from the government.
By requiring drivers to have compulsory third-party insurance, governments benefit from increased public safety on the roads, reduced costs for road maintenance, and decreased uninsured drivers.
And if the government is taken on less strain, we as the public get some respite too. Considering how taxes fund the RAF, we could see a lessening in certain taxes being charged to us.
Compulsory third-party car insurance benefits drivers, insurance companies, governments, and society.
By ensuring drivers have the appropriate financial protection in the event of an accident, compulsory third-party insurance helps promote road safety. This reduces the financial burden on individuals and society in the event of an accident.
Secure peace of mind on the road ahead — Get your quote today and drive with confidence!
Pineapple (FSP 48650) is underwritten by Old Mutual Alternative Risk Transfer Insure Limited, a licensed Non-Life Insurer and authorised FSP. T&Cs apply. Premium is risk profile dependent.
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Team Pineapple comprises our company’s top talents, who are dedicated to creating clear, high-quality content on essential vehicle insurance topics. This diverse group, including actuaries, accountants, data scientists, and insurance professionals across South Africa, collaborates to produce enlightening and empowering articles.
Each piece is thoroughly researched, factually accurate, and rigorously reviewed to ensure quality.
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Disclaimer
Please Note: The information provided above is for informational purposes only; you should not construe any such information as legal or financial advice.
