When it comes to insurance, one of the most important things to understand is what you’re actually insured for. In simple terms, insurance is about covering risk – and different assets come with different kinds of risk. For example, car insurance might be comprehensive, third-party, or fire and theft. Meanwhile, home insurance typically separates building cover from contents cover.

What You’re Insuring – and For How Much

The type of cover and the value of the asset both directly affect your premium. A high-value asset will generally attract a higher premium than something less valuable. That’s why it’s crucial to insure your asset for its full value.

If you underinsure, you essentially become your own insurer for the difference. Let’s say your car is worth R100,000, but you only insure it for R80,000. In the event of a total loss, you’ll only get R80,000. If you suffer R50,000 in damages, you might only be paid R40,000-because you’re considered responsible for 20% of the loss.

Conversely, overinsuring won’t result in a higher payout. If you insure your car for R120,000 and it’s worth R100,000, the most you’ll receive is R100,000. Insurance is meant to compensate you for loss-not provide a profit.

Risk Factors Matter

Beyond value, insurers also look at the risk associated with the asset and its usage. A car that’s frequently driven or travels through high-crime areas will cost more to insure than one that’s rarely used and kept securely. Similarly, a home without security features like burglar bars or alarms will have higher premiums than a more secure home.

How the Asset Is Used

Use plays a big role too. A car that racks up lots of kilometres each year poses a higher risk than one used sparingly. While not all insurers track mileage, many are beginning to, and it can impact your premium.

Your Risk Profile as the Owner

Insurance companies also evaluate your personal risk profile. Less experienced drivers typically pay more, and there’s solid evidence that female drivers tend to be involved in fewer serious accidents, which often results in lower premiums for women.

Your driving history also matters. The longer you go without filing a claim, the more likely you are to be considered a low-risk driver. This is often reflected in a “no claims bonus,” which reduces your premium over time.

Excess and Optional Extras

Choosing a higher excess (the portion you pay in the event of a claim) can lower your monthly premium. Why? Because you’re sharing more of the risk with the insurer.

Optional extras – like car hire, roadside assistance, or towing services – can increase your premiums. If your car is driven by someone else, especially an inexperienced driver, some insurers may impose an additional excess.

Your Responsibilities – and the Fine Print

All these terms and conditions are laid out in your policy document. This is your official agreement with the insurer. It’s critical that you read and understand it fully.

For example, some insurers require used cars to be inspected before coverage begins. Others expect that your car always remains roadworthy. If your asset is damaged during illegal activity – such as being driven under the influence or by an unlicensed driver – the claim may be denied.

At Magis, We Help You Make the Right Choice

We walk you through all these factors before recommending an insurer, so you’re not caught off guard. Remember, insurers only pay claims based on what’s in your policy. Take the time to understand your cover – it could save you a lot in the long run.