Why the cheapest car insurance isn’t always the best

Reducing your car insurance premiums can reduce your monthly expenses. Before you accept the cheaper quote, make sure you know exactly what benefits you do and don’t have.

We priced insurance for a 2016 Polo Vivo and found different options ranging from over R1 000 to under R100 a month. That’s a big difference – and there’s a big difference in the cover. We looked at what was included in the cover. Then we identified the most important things you need to look for when you are thinking about changing your car insurance.

Know your cover type

There are three types of car insurance:

As the name suggests, this insurance covers most events including accidents, theft, damage to your own car and damage to other vehicles.

Comprehensive car insurance comes with a range of other benefits, which are either included in the premium or come at an additional cost. These are benefits such as cover for claims for damage to your windows or windscreen, roadside assist and a rental car while your car is being repaired after an accident or is stolen. These policies may have a set premium each month, or a premium that varies depending on how many kilometres you travel in the month.

Third party insurance
These policies only cover damage to third parties. So, if you are in an accident and yours and the other persons’ cars are damaged, your insurance will only cover the damage to the other person’s car. You’ll have to pay for your own repairs from your pocket.

Fire and theft
This is also known as limited fire and theft and covers damage to your vehicle only in certain circumstances such as theft. Other than that, you will have to pay for your own repairs and for any damage to another car or property should you be involved in an accident.

You can have both third party and fire and theft insurance or only one of these. Comprehensive car insurance will include both third party and fire and theft.

The difference in premiums is significant. For example, for our Polo:

Comprehensive car insurance per month: R1 159

Third party and fire and theft: R260

Third party insurance: R93

Fire and theft: R191

Third party and fire and theft policies are the cheapest kind of insurance for your car, but they offer very limited cover. Comprehensive car insurance policies differ greatly in benefits and premiums, so you need to look closely at the terms and conditions and find out exactly what is and isn’t insured, so that you can compare what’s on offer. Here are some things to look out for.

Retail value, market value and trade value

These are the different values you can insure your car for.

Retail value
The price you will pay for a car similar to yours. Some policies also call this replacement value.

Market value
The amount you could sell your car for on the open market. It takes into account your mileage, condition of your car and other factors such as the service history. It should be more than trade value, but less than retail value.

Trade value
The price a dealer will pay you for your car. This will be lower than the retail value because the dealer has costs and wants to make a profit! Trade value is sometimes taken as the average between retail and market value, so be sure to ask how your insurer defines trade value if they use this term.

Your insurance premium for insuring your car at retail value will be more than insuring your car at market value. Which means you can save some money by insuring your car at market value – just make sure you don’t insure it for too little.

Are premiums based on how far you drive?

Since lockdown, many of us are spending a lot less time driving on the roads. Insurers have in some cases reduced premiums or set premiums based on usage – how many kilometres you drive each month. These policies can be very beneficial if you don’t drive too far.

Always ask if there are minimum and maximum limits on kilometres driven, and what happens to your premium if you suddenly start driving a lot more than in previous months.


Excesses are the amounts you pay towards a claim. For example, if your excess is R3 000 and your claim is R10 000, you need to pay R3 000 towards the R10 000. The higher your excess the lower your premium, so taking a higher excess will lower your insurance debit order. Just be sure that if you need a repair you can afford it, and check that the difference really is worth it.

We looked at two options for our Polo. One policy offered a premium of R573 and another R595. The policy with the lower premium had an excess of R8 950, the policy with the higher premium had an excess of R5 950. That’s a difference of R3 000 in the excess for an additional premium of R22 a month. You need to decide if that’s worth it and if you have R8 950 in savings you can use if you need to.

Must haves and optionals

SA’s short term insurance market is very competitive so there are many options you can consider. Some policies allow you to add certain benefits such as car rental at a small extra premium, others have standard items that are covered, including:

Towing and storage
Towing a car after an accident can be quite expensive and often needs to be paid upfront so this benefit can come in handy.

Car rental
Will you need a car if yours is out of action and how much more will it cost or is it included in the cover?

Can you reduce the premium if you opt for no cashback on your policy? The same goes for rewards, which some insurers have started to offer.

Driver and roadside assist
This includes staying with a driver in unsafe conditions, completing roadside repair and getting fuel to you if you run out. When an emergency strikes these can be good benefits to have, but can you save money by not taking them and keeping your car in good condition?

Glass cover, dents and scratches: How much cover do you have for accidental damages such as scraping a gate or parking pillar and what are the claims procedures? Is this cover included in the policy or do you need to pay extra for it?

Keys and locks: Your insurer may cover replacement keys and locks to a certain amount, in full or not at all. Find out what a replacement key will cost you, and if the cover is worth the premium.

Hail damage: Do you have comprehensive hail cover and how much more does it cost?

Annual premium increases: Do premiums increase each year and by how much? Some premiums don’t increase, some do. If your premium increases significantly each year, your insurance may become too expensive, even if the initial premium was low. Remember to call your insurer once a year just before your policy anniversary to see if you can get a cheaper premium if the value of your car has decreased.

Tracking devices and apps

To monitor cars, find them if they are stolen and monitor your driving, various tracking devices and apps are available. Your insurer may insist on these and install them for you, or request that you pay for installation and offer a discount on the installation at a preferred supplier. You may also get a reduction in your insurance premium if you increase your vehicle’s security. Find out the cost of these and how they affect your premiums.

If your car is financed

Your finance company may specify what type of cover you need. Always ask your finance company first before you reduce insurance premiums.

What cover do you need?

When you’ve assessed the options ask yourself what cover you need and what happens if you don’t have cover and something happens such as you have to replace your windscreen or have major repairs or you’re involved in an accident Compare this to the premium and decide which is more affordable.

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