The Ins and Outs of Car Insurance Premiums

If you own a car or a fleet or cars, or any vehicles for that matter, you should be no stranger to car insurance. Car insurance is obviously necessary to protect yourself against the high costs of replacing or repairing vehicles in the event of vehicle theft, loss or repairs.

However, one of the most commonly asked questions regarding car insurance is why it does not follow that as cars depreciate each year so to do their respective monthly insurance premiums?

The answer to this common car insurance question is relatively easy to answer. Most car owners assume the greatest cost to insurance companies is the complete loss of a vehicle though theft or write-off.

However, this is not the case. You may be surprised to find out that the greatest cost to insurance companies are the vehicle repairs to due to accidents.

Whenever a car is damaged in an accident, an insurance company really only has two options - pay for the car to be repaired or write it off. When it comes to repairing cars, this is where costs have increased even beyond the levels of inflation.

The reason is simply that car technology has grown so rapidly that even the lower-end cars these days contain sophisticated and highly complex technical components reserved just a few years ago solely for upper-end models.

As such, the cost of replacing these components has become very expensive, especially in the case of imported components. This is why car insurance premiums are not lowered as might be expected but stay the same and, in some cases, even increase.

For instance it can cost over R45 000 just to fit a car with new airbags!

Then there is the 'accident factor'. Remember that your car insurance premiums also cover 3rd party insurance in the event that an accident occurs which is your fault where other cars or vehicles are involved.

If you 'ding' an old Uno you would give a sigh or relief but imagine 'dinging' a Lamborghini - you might have a heart attack! As such, your insurance company will adjust your monthly car insurance premiums accordingly to take all of the above into consideration.