Avoiding the pitfalls of insuring your child's car

A first car is a rite of passage for many young South Africans; however, the high accident rate among this age bracket due to a lack of driving experience and inability to handle high pressure situations, means that insurance companies are often required to levy higher premiums on these drivers.

Studies have shown that young drivers between the ages of 16 to 21 are ten times more likely to be involved in an accident than those aged between 30 to 59. Some newly-qualified, young drivers may even be forced to pay up to three times more than an experienced driver for their car insurance.

According to Christelle Fourie, Managing Director of MUA Insurance Acceptances, this is a problem many parents are confronted with as they decide how best to insure their children on the road. “Many parents opt to simply put their children onto their own insurance policies and pay the premium for them. However, we have seen a number of cases where children who are well into their thirties are still on their parent’s policies and continue to have their premium paid.”

“While this is an honourable approach, the reality is that by doing this, parents can end up impacting on their own claims history and their children are encouraged to delay taking responsibility for themselves.

“It is best to let children take out their own insurance cover as soon as they acquire their first car – even if this proves to be an expensive exercise at the outset. The younger someone begins with a good claims record, the sooner they will be able to erase the additional loading charged due to age.”

Fourie says that even if some parents choose to pay the premium on their child’s policy, it is important to begin encouraging them to start building their own insurance records from a young age, and to pay the correct risk premiums so they can start taking responsibility for the costs of running a motor vehicle.

She says if young people find the costs too high then it may be an idea to combine their motor and home policy, as the majority of insurance companies offer reduced car insurance premiums if the policy is accompanied by household contents insurance.

“Some insurers will also offer a premium discount if the insured chooses an additional voluntary excess, so it may be better for parents to assist their children by funding the voluntary excess during the early years of insurance instead of placing them on their own policy.”

Fourie says another method that may not keep premiums down, but can be used as a personal risk management tool by parents to minimise the likelihood of their child being involved in an accident, is to install a tracking device. “This enables parents to monitor not only where their children’s cars are at any time of the day or night but also exactly how fast they are driving.”

“Many people are not aware of the benefits of using a tracking device from a safety perspective, however, it can be an effective tool through which to determine not only where your child is driving but also to encourage responsible driving behaviour. Given the alarmingly high accident rate in this country, this is perhaps the most important to parents in South Africa,” concludes Fourie.