Vehicle insurance is one of the most common forms of short term insurance. It typically covers the driver for legal liability and covers damage and loss to the vehicle itself.
There are 3 basic forms of vehicle insurance namely: third party insurance; fire and theft insurance; and comprehensive cover.
Vehicle insurance premiums are calculated based on the car itself, your age, sex, location, driving history and credit rating. Some insurance companies offer discounts based on how much the car is used. How much the vehicle is used is established in the following ways:
Estimation
Some
motor insurance policies allow for an estimation of the average annual mileage done in the insured vehicle. A discount is provided for drivers who drive infrequently and accrue lower miles. Due to problems verifying actual distances traveled this form of discount isn’t common.
Odometer Readings
Prepaid miles of insurance are purchased and cover ends if those miles are exceeded. This top-up form of insurance is open to abuse via odometer tampering.
GPS Tracking
GPS tracking devices are becoming commonplace in South Africa due to high crime rates, thus making this form of insurance discount viable. Discounts are provided for fitting a vehicle with a GPS tracking system. Further discounts on insurance premiums are available for products like Hollard’s ‘Pay As You Drive’ policy where distances traveled are reported to the
insurance company and low mileage is rewarded with discounts.