There is no excuse not to be insured

With third-party insurance available for only R38 per month, not being insured could be the most expensive decision you ever make.

third-party insuranceA reader wrote recently to complain that a driver had stopped in front of him unexpectedly, causing him to crash into the back of her. As he was uninsured he now has to pay for both the damage to her car as well as his, leaving him with no option but to take on more debt to cover the bills.

Even if the other driver was insured, her insurance company will still require him to pay for the damage. Normally this would be paid from third-party insurance, but as he is not insured, her insurer would sue him in his personal capacity.

While insurance companies have always had the ability to go after uninsured drivers to recover the costs of damages, the litigation has not always been worth the cost. That however is changing as profits in the insurance industry are under pressure, mostly due to the fact that only one-third of South Africans have vehicle insurance, which means that they are picking up the tab for the rest of the drivers.

Despite the financial risk of an accident, 70% of drivers remain uninsured. People argue that they cannot afford to be insured, but in reality, if you can put petrol in your car, you can afford to pay at least for third-party insurance.

Third-party insurance is when the damage done to another car is completely covered by the insurance, although it will not pay out for the damage done to your own car. It’s relatively inexpensive cover – most direct insurers are able to provide third-party cover for between R50 and R100 per month.

Ernest North, co-founder of Naked Insurance, a new digital, app-based insurance company, says they offer third-party insurance for as little as R38 per month for damage up to R5 million – which should cover most accidents. Your premium will still depend on your age and driving experience, but will not be influenced by the value of the car you drive as your car is not covered.

For example, a 25-year-old with a good credit record would pay R76 per month for R5 million worth of third-party liability with no excess. A 32-year-old with an average credit record would pay R59 per month. If you consider that that is only around R708-R900 a year which will save you millions if you ever crashed into that Ferrari or even a Mini Cooper, it’s financial suicide not to take the cover.

This article first appeared in City Press.

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