In Kenya, motor vehicle insurance is mandatory for all car owners. It provides financial protection against losses from accidents, theft, or damage, covers medical expenses, and ensures legal compliance.
Although acquiring insurance is a legal requirement, motor vehicle owners frequently face the challenge of selecting the right policy. When researching insurance options, it is crucial for car owners to understand the various factors that influence insurance costs, which can help them choose the most suitable policy for their needs.
This article explores factors such as age and experience, driving history, location, and coverage type that affect car insurance costs:
1. Driver’s Age and Experience
Insurance companies adjust premiums based on a driver’s age and experience. Younger or less experienced drivers often face higher costs due to their higher risk of accidents, as they may have less skill and judgment on the road. Conversely, older, more experienced drivers usually benefit from lower premiums and discounts because they are perceived as more responsible, with better driving skills and a lower likelihood of causing accidents.
2. Driving History
Insurers evaluate your driving history to determine your risk profile. A record of safe driving typically results in lower premiums, while frequent claims or traffic violations indicate higher risk, leading to increased insurance costs. A history of accidents or violations suggests a greater likelihood of future claims, which drives up premiums.
3. Location Areas
In Kenya, car insurance costs can hike if you live in areas with high crime rates, traffic congestion, frequent accidents, poor road conditions, or specific local regulations, as these factors increase the risk of theft, damage, or accidents.
4. Coverage Type
Motor vehicle insurance is offered in different packages including third-party, comprehensive, and third-party, fire and theft policies.
Third-party insurance
In Kenya, third-party insurance is the minimum legal requirement for all vehicles. It covers liability for injuries or deaths to third parties (drivers, passengers, or pedestrians) and costs associated with property damage resulting from an accident.
This insurance does not cover damage to the insured vehicle or its occupants. As required by the Traffic Act, all vehicles must have third-party insurance to ensure compensation for damage or injury caused to others.
Third-party, fire, and theft insurance
Third-party, fire, and theft insurance is a type of car insurance that provides coverage in three key areas: third-party liability, fire and theft.
- Third-Party Liability: This covers damages or injuries inflicted on others, including their vehicles or property, in an accident where you are at fault. However, it does not extend to damage to your own vehicle.
- Fire : This part of the policy covers damage to your vehicle caused by fire, whether from accidental incidents or deliberate acts like arson.
- Theft: It offers compensation if your vehicle is stolen or vandalized.
Although this insurance provides broader protection than basic third-party coverage, it still does not cover damage to your own vehicle resulting from accidents.
Comprehensive Insurance
Comprehensive insurance offers the most extensive coverage, including protection against accidental damage to the vehicle, theft, fire, vandalism, natural disasters (e.g., floods, landslides), and third-party liabilities.
This policy is best suited for high-value vehicles or those requiring extensive coverage. As a result, the price of comprehensive insurance can be influenced by various factors assessed during the evaluation of your car.
Insurers will closely assess the following factors about your vehicle to determine your insurance quote:
- Vehicle age: Generally, older vehicles often attract higher insurance premiums due to their increased risk of mechanical failure and the lack of modern safety features.
- Vehicle make and model: Insurance costs can vary based on the make and model of the vehicle. Rare or high-performance cars typically incur higher premiums, while vehicles with lower safety ratings or poor claims histories for specific makes and models may also face increased costs.
- Vehicle usage: Insurance rates are influenced by the vehicle’s usage. For example, whether the vehicle is used for personal, commercial, or Public Service Vehicle (PSV) purposes can affect the premium.
- Vehicle value: Insurance premiums tend to be higher for vehicles with greater market value. Recently, even cars valued below Ksh750,000 have experienced an increase in premiums. However, high-value vehicles may still enjoy relatively lower rates compared to their worth, due to the insurer’s risk evaluation.
- Claims history: Your claim history can impact your insurance premiums. Frequent claims within a policy period can lead to higher premiums, and excessive claims may even cause the insurer to refuse future coverage or choose not to renew the policy.
It is important to note that insurance companies use databases, industry guides, and expert appraisals to determine vehicle values. Additionally, modifications or upgrades can affect the valuation, so keep this in mind when seeking insurance.
Obtaining insurance is paramount for every car owner, as knowing that you are protected financially in case of an accident or other incidents provides peace of mind and allows you to drive with confidence.
