Compulsory Insurance can be described as insurance that you are forced to take out by law. In many other countries car or auto insurance, as it is often called, is compulsory. In South Africa we are not forced to take out any form of car insurance. If one consider the number of accidents and the high level of crime it should actually be compulsory.

In South Africa we have the Road Accident Fund that pays out claims to third parties involved in car accidents. We could say that it is a form of compulsory insurance as all drivers contribute to this fund. How? The fund is financed through a fuel levy which is added to the price of fuel; so every time you fill your car you contribute to the fund. There were some major changes to the Road Accident Fund in 2008 (see our glossary entry on the Road Accident Fund for more details.)

There is one scenario where car insurance actually become compulsory in South Africa – when you buy a car that is financed, the bank of financier will insist on you taking out comprehensive car insurance. They need this to safeguard them against a major loss should your car be stolen, written off or damaged while there is still an outstanding balance on the loan.