If the value of your car decreases, shouldn't your insurance premiums?

Don’t you hate it?

You buy a home, right? You pay your bond for twenty years, let’s say R5, 000 a month, and down to the very last payment, you pay R5, 000.

Never mind the fact, that if you add up everything you’ve spent over those twenty years, you could have bought 3 homes.

Wouldn’t it have been nice if those bond repayments started dropping from year ten, so that your last payment was only a couple of hundred Rand?

But it’s the same with car and home insurance…

Firstly, it’s not cheap – especially if you’re young and have never had any insurance yet. It’s like applying for a loan and them asking you for your credit history. How on earth are you supposed to have a credit history when it’s the first time you’re applying for cover?

So right off the bat, they penalise you because you haven’t got insurance history.

For most of us the first thing we ever get to insure is our car…although with the cost of smartphones nowadays, I reckon this could well overtake cars for first time insurance buyers.

But anyway, getting back to cars… They quote you a steep price and tell you that you need to build up a no claims history in order to qualify for a cheaper cost.

With your back against the wall, grudgingly you accept their terms. Come the end of the year, they tell you your cost is going up by 10%. By the way, what happened to your ‘no claims’ bonus which would have made it cheaper?

And what about that other catch – the -so called ‘cash back’ bonus?

You pay your premiums – which go up every year by 10% regardless – in order to get some money back after 4 years. But have one claim during all that time and you can kiss the cash goodbye.

Which brings us to the biggest question in all of insurance history

Why is it that every year my car loses value BUT the cost of insurance either stays the same or goes up?

Have you noticed that it only goes down when you threaten to cancel?

It would make sense to pay less if most of the claims were for theft. But the truth is that most claims are accident related. So just because your car is 5 years old doesn’t mean  it’s going to be any cheaper to repair than this year’s model.

  • Panelbeaters don’t get cheaper every year. If you find one who does, let me know.
  • Spare parts aren’t getting cheaper either. Ask me, I know.
  • The number of accident claims could also be on the rise. These costs have to be covered. And since insurance is all about pooling risk, that means you and I have to help cover the cost. And the only way to do that is by increasing your cost.

So yes, we can understand that the annual cost would increase, but what about the monthly cost?

What if there was an insurer who was willing to drop your monthly cost in line with the drop in value of your car?

Turns out that King Price has done just that, but how does it work in practice?

So let’s say you’re insured with Company A:

Month Retail value Insured Value Monthly cost
January 120, 000 120, 000 R500
February 118, 800 120, 000 R500
March 117, 612 120, 000 R500
April 116, 435 120, 000 R500
May 115, 271 120, 000 R500
June 114, 118 120, 000 R500
July 112, 977 120, 000 R500
August 111, 847 120, 000 R500
September 110, 729 120, 000 R500
October 109, 622 120, 000 R500
November 108, 525 120, 000 R500
December 107, 440 120, 000 R500
January 106, 366 106, 366 R570


  • They offer to insure your R120, 000 car at R500 a month
  • After a year they drop the value of your car to R106, 366 but raise the cost to R570 a month regardless of the fact that you never claimed once during the year
  • So you’re paying for a car worth R120, 000 but if it gets stolen in December, they’ll only pay you R107, 440?

Here’s how it works at King Price Insurance:

Month Retail value Insured Value Monthly cost
January 120, 000 120, 000 R500
February 118, 800 118, 800 R495
March 117, 612 117, 612 R490
April 116, 435 116, 435 R485
May 115, 271 115, 271 R480
June 114, 118 114, 118 R475
July 112, 977 112, 977 R470
August 111, 847 111, 847 R465
September 110, 729 110, 729 R460
October 109, 622 109, 622 R455
November 108, 525 108, 525 R450
December 107, 440 107, 440 R445
January 106, 366 106, 366 R495

Okay, this is purely for illustration purposes (You’d need to get an actual quote), but it does give you an idea of how it works.

Of course, none of this makes any difference if King Price insurance isn’t competitive in the first place.

By this I mean, if Company A is offering the insurance at R500 a month while King Price Insurance offers you the same insurance at R600 a month.

But here’s what I suggest…

Get a quotation from King Price. If they quote you in the same ballpark as your current insurer, then consider the move.

Nothing better than insurance which costs you less every month regardless of whether you claim.

Leave your details below and we will get an authorised King Price consultant to call you back.

It’s car insurance with a difference.

Until next time

The InsuranceFundi Team

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  1. Firstly, King Price insurance is the best around. I am in the motor industry and I understand that vehicles do depreciate in price every month. This meaning that your retail value of your vehicle drops and should be insured for the retail value of your vehicle, NOT MARKET VALUE. So it makes sense that King Price insurance premiums drops every month. It makes no sense that your insurance premiums should increase by 10% every year if the value of your cover drops every month.
    Look at it this way, an example, you pay R1000-00 to cover the retail value of your car for R100000-00. After 4 years you are paying close to R1500-00 for a vehicle that is worth close to R50000-00.
    King Price is the only correct insurance on the market. The most consumer friendly insurance and makes the most sense.

  2. funny how you guys are only concerntrating on the first year. cause after decreasing your premiums by like R8-00 a month for the first it then goes up every year after that making them the same as any other company

    • Hi,

      Remember that the article was for illustration purposes only. Who knows what the cost will be one year from now?

      The question we need to ask is: “Would I prefer paying a R1, 000 a month for 12 months or starting off at R1, 000 a month and then having that drop down to R800 a month by year end?”

      Yes, there is a potential increase at the end of each year depending on the King Price actual cost and claims history (just like it does with every other insurer). In the article we assumed that the cost increased in line with other insurers. That doesn’t make the cost savings you enjoyed throughout the year null and void.

      At the end of the year you might find that the King Price cost increases way more than at another insurer – or it might be the other way around. At that point it’s up to you to decide whether you want to move to another insurer or not.

  3. My Vehicle is insured wit h King Price, the premium 3 years ago 2013, started at about R718 pm, from time to time the premium did reduce and by Dec 2016 the premium was about R650pm. Over the +-3yrs NO claims were made. However in 2017 the premium increased to R830pm. This is about 28% increase at one go. So now I pay a premium more than when we commenced 3yrs ago, for a vehicle which is valued lower. So it appears that there is NO FREE LUNCH, since King Price will make up for reducing the premiums, so it does appear to be a GIMMICK

    • Hi,

      You have a valid comment, but let’s also look at it from the viewpoint of the insurer for a moment.

      Insurance premiums are based on a couple of things.
      First, the actual claims experience of the insurer might go up drastically. Think of all the fire insurance claims that will be coming through for Knysna? Expect cost increases as a result.
      Then there is the costs of running the insurance company. Staff, just like you and I, expect an increase every year. And then, of course, there’s the panelbeaters and other service providers who also have cost increases. No successful business I know of charges less and less each year for their services.

      Getting to the value of your 3 year old car. Don’t for a moment believe that it’s any cheaper to repair than a brand new one. A month ago my 10 year old car’s rear view mirror was damaged. The repair bill – R38, 000. Should I therefore expect to pay R50 a month for car insurance simply because my car is 10 years old and only worth R120, 000?

      What we do have however, is choice, and if we’re being treated unfairly, we have the option of taking our business elsewhere. My suggestion is that you call King Price and ask for a better quote based on your no claims history. They’d rather keep you as a client than have to find a new one.

    • HI,

      InsuranceFundi is a blog providing factual information on financial topics. If the article pertains to a specific insurance product, we usually approach them and ask that they verify if the information is correct. We don’t offer personal financial advice and suggest you make use of a financial advisor for that.

    • Hi Sindisiwe,

      A bond is a loan, not sure what your question relates to? A bond should also be the cheapest loan you can get.
      Insurance is basically there to protect the asset or pay off the bond in the event of something untoward happening to you.

  4. I thought you are independent, but I see you always recommend some service providers. Ho can we now be sure that your recommendation is just and fair…

    • Hi Joyce,

      We are independent. When we started this blog our intention was to generate clients for our own business. Since then we’ve decided to investigate other products out there.

      These articles aren’t recommendations but rather a review of these products. If you take the time to do the search, the same information is available to you on their individual websites.
      Our definition of recommendation would mean comparing two similar products and making a recommendation as to which is the better of the two. Without insight into your personal situation, we’d be unable to make such a recommendation.

  5. I was just called by one of your consultants, who have no idea how to address a potentialy new client. Her tone was, in my observation, derogatory. I needed to be Quoted for vehicle insurance on a 2010 mercedes ML350 cdi. Please have somone, with some people skill call me back. Ps. I did not get her name, sorry.