Author: Marizka Esterhuizen, Insurance Broker The main function of insurance is to put the insured into the same position as they were before a loss or accident. Santam states on their website that: “The retail value of a car (which is usually the higher value of the two) is the average price a car dealer would sell it for. In insurance terms, this means that if your car is covered for its retail value and it is written off in an accident or stolen without being recovered, the settlement amount will be based on the car’s retail value. If your car is insured for its retail value, it will be much easier to replace a damaged or stolen car with a similar make and model. The market value of a car is almost always lower than the retail value and takes into account a number of variables, including mileage, vehicle condition, service history and accident reports. If you were to sell your car privately, the market value would be the price that you could likely sell it for. Because this figure can vary from car to car, short-term insurers need to find a way to standardise the market value. The reasonable market value uses the retail value as the base and takes into account the amount of kilometres on your car’s odometer, the condition of the car as well as any extra items added to the car.” Therefore, if you insure your vehicle at market value you will not be able to replace the vehicle with a similar vehicle, leaving you in a worse position than before the loss or accident. You can use the calculator on Santam’s website to calculate the retail value of your vehicle by using the Auto Dealer Code, or your vehicles exact specifications, e.g. year, make, module etc. The Auto Dealer code was developed by TransUnion to specify vehicles. TransUnion has been gathering data over five decades and updates their data monthly to ensure that they provide accurate information in their guides. These guides are used by insurance, financing, and motor trader companies. “Can you please also explain why the Honda Jazz is insured for a less value, but the monthly insurance is higher than the Jeep Compass?”Insurance companies uses various factor that impact the rate at which the insurance premiums are calculated. These factors include, but are not limited to, the regular driver, vehicle specifications and the claims history.
Insurance premium rates are calculated by actuaries every year using data collected over the previous years. With today’s technologies and the vast well of data available, insurance companies have moved over to a client specific risk-based approach. Meaning that insurance rates are calculated per individual with vehicle insurance, insurance companies look at the regular driver, taking into account the following factors: • Age • Marital status • Gender • Occupation The vehicles specifications also play a role in calculation the rate. For example, older vehicles have been on the road longer and are therefore more prone to breakdowns, the parts are harder to find and therefore more expensive even if their retail value is lower than other vehicles. Hijacking statistics are also used, as a result vehicle like VW Polo’s that are more likely to be hijacked, have higher insurance rates. Insurance companies look at the following factors: • Year the vehicle was manufactured • Vehicle module • Vehicle make • The colour of the vehicle • Extras on the vehicle • Vehicle security • Where the vehicle is parked in the day and at night The claims history of the driver is used in calculating the rate for the premium, a higher loss ratio will result in a higher premium. • Your loss ratio, which is the losses an insurer incurs due to paid claims as a percentage of premiums earned. • Your loss ratio is calculated by dividing the claim amount by the annual premium. In conclusion, there are various factors that can result in the premium for the Honda Jazz being higher than the Jeep. To get help and advice on your car insurance, please contact 011-658-1333, Option 3, email service@daberistic.com to speak to one of our insurance brokers.
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January 2025
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