Five factors that influence motor insurance premiums

There are many factors that determine how much one pays for their motor insurance – claims history, frequency of use and location being just a few – but there are also a number of misconceptions about how a premium is calculated and what consumers are act

With the cost of running a car increasing exponentially, it is becoming critical for consumers to understand how premiums are calculated and the most common factors that impact on motor insurance, in order to make an informed decision.

Fact 1 – Colour choice does not play a major role in premium costs

Some consumers believe that the colour of a vehicle plays a significant part in calculating insurance premium fees, with red or black cars costing the most to insure. The truth is, most insurers have little interest in the colour of a car, they are more interested in knowing if the driver has had any previous car accidents, the number of kilometres to be driven annually and where the insured lives.

The type of vehicle is actually more likely to impact premiums, so it is crucial to check the insurance costs ahead of purchasing a new or used car as motor insurance premiums are largely based on the car make, model, body type, engine size, and the age of the vehicle, as well as the age and driving record of the driver. Premiums can also be based, in part, on the vehicles’ retail value, the cost to repair it, its overall safety record, and the likelihood of theft.

Fact 2 – Older people pay less for car insurance

Some good news for older consumers is that most insurance providers offer drivers over the age of 55 years the opportunity to qualify for a significant reduction in motor insurance premiums and a reduced excess. Those who are retired or not employed full time, but are under the age of 55, may also be eligible for a discount.

Fact 3 – If another person drives the insured’s car, the other person’s motor insurance may not cover them in the event of an accident
It is vital to be aware that the motor insurance policy covering the vehicle involved is considered the primary insurance, which means that the vehicle owner’s insurance company must pay for damages caused by an accident. It is crucial that the insured is familiar with the terms and conditions of their policy when allowing another person to drive their car as there may be specific driver limitations in respect of age and nominated and/or regular drivers noted on the policy schedule.

Fact 4 – Personal motor insurance does not cover business use of the car

It is imperative for consumers who are self-employed and use their vehicle for business purposes to understand that personal motor insurance is unlikely to fully protect them in the event of a claim. The exact use of the motor vehicle must be stipulated upfront when taking out insurance cover. If other people, for example employees, also make use of the car it is vital that the owner ensures that the other drivers have good driving records before doing so.

Fact 5 – Every motor vehicle owner should have personal accident insurance

Amendments to the Road Accident Fund (RAF) legislation, which came into effect in August 2008, now restricts injured parties to claim only against the RAF, limiting the claim for loss and support to R160 000 per year, irrespective of the actual income loss, and subject to a quarterly inflation adjustment. A claim for general damages is limited to “serious” injuries as described in the regulations of the amended Act. However, most importantly, injured parties had their common law right to claim against the driver removed. When it comes to the right to claim for more than the restricted cover provided by the RAF, the responsibility to look for other avenues to obtain adequate personal accident, disability, health and life insurance cover now lies with the consumer.