What you should know about ‘pay per k’ car insurance
You may have heard about the latest car insurance product to hit South Africa. It’s a new type of comprehensive car insurance offering that hinges on consumers paying for their cover by monitoring their mileage. It’s meant to make insurance cheaper if you drive less, but precisely what’s covered does tend to vary from insurer to insurer, so we can’t say definitively that what you’re paying for will include all the bells and whistles… But we can at least comment on how this new premium model is meant to work. Because the thing is, it’s a super budget-friendly car insurance option for people who can’t afford the traditional type of cover and don’t drive their cars that much.
Here’s a general look at how this ‘pay per k’ approach to car insurance works
The details about your car matters
So, it looks as though the type of car you want to insure with the ‘pay per k’ approach does matter. Not like your car has to be a specific make and model or there’s a ‘red cars only’ vibe, but your car’s value and how much you actually drive will be looked at. 1 policy that we viewed stated that in order to qualify, your car’s value would have to be under R500,000 and you ideally should only be using it to travel less than 100km per month to pay the low rate that this insurer advertises. In case you’re wondering, we’re talking about the King Price ‘chilli insurance’ cover, which promotes a super cheap R299 monthly premium.
How much you drive matters, too
The way this typically works is that this month’s mileage will determine your premium for next month. So, let’s go back to that chilli insurance. The royal insurer says that if you drive 100km or less, you could pay R299 per month, however if you drive more than 100km then your premium will increase.
Before we get too bogged down in the specifics of that specific product, let’s go back to the main point. What you need to know is that with the ‘pay per k’ approach, your cover shouldn’t be cancelled if you drive more. You’ll just pay a bit more. Similarly if you drive less then you’ll pay less.
You’ll have to keep track of your mileage
It’s really important for this type of car insurance contract that you track your mileage, seeing as your premium partly hinges on these figures. How you track your mileage is up to you and your insurance company. What we’ve seen is that some insurers will give you the choice of installing a tracking system that automatically sends them your mileage. It’s a tracker that you pay for, and it’s important to note that you’ll most likely pay the tracking company directly. It won’t be a fee that’s included with your car insurance premium, so this is worth knowing.
If you don’t like the sound of that, then some insurers will let you update your monthly mileage yourself for free. However it works, just make sure you understand how your insurer wants you to track your mileage because it’s vital to your premium being calculated so that you can keep up with your payments and maintain your cover.
What happens if you drive a lot in 1 month
Right, so the thing is if you drive a lot more than usual, your increased mileage will be used to adjust your next month’s premium. So, the next month you’ll find that you’ll pay a higher amount. It’s so important to understand what these cost implications could be so that you don’t get a fright when you see a bigger amount go off your account.
What won’t happen is that your cover should absolutely not be cancelled. Driving more isn’t breaking the rules. All it does is cause your premium to change, so the next month if you drive a lot less, you’ll see that your premium will go back down again. As long as you maintain your payments, your cover will remain intact.