Key factors determining car insurance premiums in South Africa

02 April 2024 Yulanda Paterson, GM at Infiniti Insurance & Infiniti Online

When thinking about purchasing a new car, whether it is a premium or luxurious upgrade, it is crucial to keep in mind that several factors will determine the cost of your insurance premiums. In South Africa, insurance companies assess the risk of insuring a specific car by evaluating several key factors.

Firstly, insurance companies consider the make of the car, model, and year. Different cars have varying levels of risk associated with them, based on factors such as their safety ratings, repair costs, and likelihood of theft. For instance, high-performance cars are often more expensive to insure than those with smaller engines. This is because larger engines have more power and are often associated with higher speeds, which can increase the risk of accidents and result in significant damage.

Secondly, the value of the car plays a significant role in determining your insurance costs. The more valuable your car, the higher the potential financial risk for the insurance company in the event of a claim resulting from an accident or theft. While the rate might be lower, luxury cars and expensive models come with higher insurance premiums compared to budget-friendly options.

Cost of repairs and Safety features
The cost of parts and repair varies depending on the make and model of the car. Locally manufactured cars have cheaper parts than imported cars. Luxury cars are typically more expensive to fix and have more expensive parts than lower-end cars. As a result, imported cars may incur higher insurance premiums.

Furthermore, insurance companies also assess the safety features of the cars to determine the premiums. Advanced safety systems, such as airbags, anti-lock brakes, and electronic stability control, can potentially reduce the risk of accidents and costly repairs.

Driving history and car mileage
Your driving history and personal details also come into play when underwriting your insurance coverage. Factors such as age, driving experience, and claims history can influence the perceived risk of insuring you. Younger drivers, for example, are often considered higher risk and may face higher premiums. This is because they simply do not have the high level of experience that enables them to avoid accidents.

The number of kilometres you drive per year can also affect your insurance premium. Drivers who travel more kilometres annually are considered to be at higher risk of accidents, so they may pay higher premiums.

Type of cover and the usage of the car
The level of coverage you choose also determines the cost of your premium. Comprehensive cover provides more extensive protection and is typically more expensive than third-party-only cover. The purpose for which you use your car can also impact your insurance premium. Cars used for business or commercial purposes are often more expensive to insure than personal vehicles.

Geographical area
Lastly, the geographical area where you reside can impact your insurance costs. Urban areas with higher traffic density and crime rates may result in higher premiums compared to rural or suburban locations.

Understanding these factors and how they influence your insurance premiums can help you make informed decisions when choosing a car to buy and an insurance provider. You should also speak to your broker who is in a better position to assist you choose the right cover for your new car. By carefully considering the type of car you purchase and maintaining a safe driving record, you can potentially lower your insurance costs and enjoy peace of mind on the road.

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