Are you curious as to how your car insurance premium may be calculated in South Africa? Many factors could affect your car insurance premium. If you are ever in doubt about your monthly premium, please contact your insurer
Calculating your car insurance premium
Insurance companies charge monthly premiums to clients in exchange for providing them with car insurance. Premiums are based on risk. The higher the risk, the higher the premium, and vice versa. For an insurer to potentially calculate an insurance premium in South Africa, they must evaluate all the risks and associated costs involved. Once assessed, they can then decide what premium should be charged for handling such a risk. Below is a breakdown of the various risk components that are considered when calculating a premium. Please note that this article is only supplying information and not any financial advice.
What are rating factors? 1
The probability of an insured event occurring and the average anticipated cost are obtained from what are known as ‘rating factors.’ These factors vary with each client. The score produced by the rating factors determines the level of risk you are to the insurer, ranging from low to high risk. This, in turn, specifies the amount of the premium required for that risk level.
What models are used? 1
Different insurers use different models, which means that different premiums may be given for the same car. The premium amount depends on a client’s risk profile, which could include some of the following factors: driving experience, the age of the driver, the marital status, and daily or annual driving distance.
- Driving experience 2
Inexperienced drivers provide the most significant risk. The more years you have been driving, the better your premium. Whether you start driving at 15 or 55 years of age, you could still be an inexperienced driver. The fewer accidents and claims you have had during time you have been driving, could help you immensely.
- Age of the driver? 2,3
The under-25 group comprises of the largest number of inexperienced drivers and, therefore, pay the highest premiums. This is because both their age and lack of experience count against them. A 45-year-old person starting to drive is more settled and mature compared to perhaps an erratic and inexperienced teenager or young adult.
- The regular driver 3
If you are under the age of 25, and the regular driver, you will most likely be paying a higher premium than someone who is older, so it may be tempting to make one of your parents the regular driver instead.
- Your marital status2
Married couples could be considered less risky as they travel less and are less active on the road than single or divorced motorists.
- Your driving distance 2
The rule is simple – the more you drive, the greater the risk of having an accident. It also depends on which area you may be commuting to and from. You may be covering many kilometres each year but travel from the city to work in an urban or rural area may be considered low risk. Compare this to the same amount of distance travelled but this time occurring within a busy city. The latter situation would pose as a higher risk. If your job changes and you do less mileage per year, inform your insurer for a possible premium reduction. But don’t forget to let them know if your annual mileage becomes high again.
Disclaimer
Buying car insurance is a complex matter, and that is why this article only consists of information. If you wish to buy car insurance, please contact a certified financial advisor for professional advice.
Should you be unhappy with your current car insurance premium? You could save up to 20%* on comprehensive car insurance with Prime South Africa, which includes unique benefits such as fixed premiums* and a reduce to zero excess*. T and Cs apply.
Sources:
