4 Factors pushing up the cost of your car insurance

Published on 15th December, 2022 at 02:56 pm

While it tends to be an annual occurrence rather than a daily one, your vehicle’s insurance premium may seem to rise as consistently as the sun. Various factors contribute to these increases, but the good news is that once you understand them, you may be able to mitigate some.

Reading time: 3 minutes

In this article you’ll learn:

• The factors that impact your insurance premiums.
• How you can keep your insurance premiums low.
• Why evaluating your car’s value using our handy tool can help you insure your car for the correct amount.

Vehicle insurance factor #1: The type of vehicle you drive

According to Attie Blaauw, head of personal lines underwriting at Santam, different brands and models of vehicles have different expected autobody and windshield repair costs, and this is reflected in the premium. “Similarly, certain vehicles are targeted more by criminals, and their premiums would reflect that. Of course, the value of the vehicle is also considered when calculating the premium,” he adds.

Vehicle insurance factor #2: Your choice of cover

The type of cover you choose also affects how much you pay. For instance, if you opt for third-party insurance only, you pay less, but your insurance coverage is limited. Comprehensive cover is more expensive and insures you against damages to your vehicle, as well property belonging to others. However, even with comprehensive coverage, you can adjust your monthly premiums by choosing your excess. “A higher excess lowers your premium,” says Blaauw.

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Vehicle insurance factor #3: Demographics and lifestyle

The neighbourhood you live in and level of security (for instance, whether your car is kept in a locked garage behind a security gate, and whether you live in an access-controlled estate) also play a role in determining the risk of theft. “Some areas experience heavier traffic, while some are targeted by thieves. These increase the likelihood of accidents and theft, respectively,” says Blaauw. “Parking your vehicle in a locked garage or covered parking can deter theft of your vehicle and protect against hail damage. These factors are taken into consideration when calculating the premium.”

Your driving experience, which is lower at a younger age, also contributes to your insurance costs. The good news is that over time your driving experience increases, and this factor can help reduce the rate of increase of your premium.

“Generally, drivers with more experience and skill are likely to pay a lower premium because they tend to be better at avoiding accidents or at least minimising the damage if they are involved in an accident.”

The amount you drive also affects your premium, and this can be relevant if you use your vehicle for business. “A vehicle used for business is likely to clock more mileage across different areas, increasing the vehicle’s exposure to risks. As a result, vehicles insured for business use are charged a higher premium,” explains Blaauw.

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Vehicle insurance factor #4: Inflation

Inflation affects more than just food and fuel costs. According to Blaauw, each policy is renewed annually, and during renewal, premiums are reviewed and adjusted to keep up with the effect of inflation on parts, paint and labour costs.

While most cars lose value over time, the replacement value could increase due to various factors such as fluctuating exchange rates or a shortage of parts. It’s therefore important to review your policy annually to make sure that you’re not over-insured and paying too much, or under-insured and won’t receive the full cover you need to replace, or repair, your vehicle.

Get a true sense of your vehicle’s value with this calculator to make sure you are neither over- nor under-insuring it. Evaluate the value of your car annually to make sure you are spending correctly on the cover you need for it.