How comprehensive is your motor insurance cover?
Your car is likely to be one of your biggest assets you will own. It’s a significant financial investment, not to mention an essential when it comes to getting from A to B for work, leisure, study and the usual family responsibilities. With more people returning to work, increasing crime, deteriorating roads infrastructure, heavy thunderstorms and accidents often waiting in the wings to put a spanner in the works, make sure that your wheels are correctly insured for any mishaps that happen along the way.
Aon South Africa, insurance brokers and risk advisors, provide a handy checklist to consider when insuring your vehicle:
- Don’t assume that your policy covers everything - check your motor insurance policy for any covers which may not form part of your standard wording such as dent cover, tyre cover, hail damage and so on.
- Buying a car? Many factors have an influence on the cost of your insurance ranging from the make and model of the vehicle, through to the cost of parts and availability, whether you need car hire in the event of an accident, whether the vehicle is used for business or personal purposes, security measures such as a tracking device, the regular driver profile and age, and even your credit rating can affect your motor insurance premium.
- Get credit shortfall insurance – An often overlooked risk is that of a credit shortfall on a financed new vehicle. This typically arises when a vehicle is written off in the first two years of signing a finance agreement to purchase a car. Accrued interest on the loan within the first two years may very well mean that your insured value of your vehicle could be less than your outstanding debt to the bank. If you don’t have credit shortfall cover to settle this amount, you will be liable for the shortfall between what’s owed to the bank, and your insurance settlement which does not cover you for the interest.
- Always insure for the retail value of the car - Ideally, you want to be in a situation where your insurance can replace ‘like for like’ and avoid being forced to compromise on the quality of your vehicle if this is not the case. Essentially, retail value is the price at which the dealer will sell a second-hand vehicle to you. Market value is the average of the difference in price between retail value and its trade-in value, in other words what you could expect to receive from a dealer, were you to trade the vehicle in.
- Beware of low premium-high excess insurance covers – If you claim on your vehicle insurance, you may have to pay what is called an insurance deductible or excess – the first portion of the claim that you are responsible for. Depending on how your policy is structured, this amount can vary. The most common is 5% of the insured value – and on a R300 000 vehicle value for example, that equates to an excess of R15 000. Be very wary of taking the lowest premium as the bite is often in the high excess structure – in some instances this can be as much as 25% of the insured value or R27500, whichever is the greater – very few people have that kind of spare cash around to cover their excess payment. Taking excess waiver cover could also be an alternative option to consider. Make sure to discuss your excess options with your broker.
- Protect yourself against vehicle theft with a tracking device - Speedy recovery if your car is stolen means less inconvenience, less damage and thus less repairs, lower cost to the insurer which means your premiums won’t be impacted and you avoid the loss of time and emotional distress usually associated with a vehicle theft. In addition, most insurers offer discounts on your monthly premiums if your vehicle is fitted with an approved anti-theft device such as a tracking system.
- Who is driving your vehicle? Make sure that your policy covers any individual that may drive your vehicle with your permission. Open driver policies will cover any person with a valid South African driver’s license who is driving your vehicle, as long as it is with your permission. Not all insurance policies are created equal in this regard, and in order to offer a lower premium that place specific exclusions in the terms of cover – like a regular driver clause.
- Insuring a student vehicle – Insuring a vehicle for a young or inexperienced driver who recently obtained their drivers licence will typically cost more in premiums due to the higher risk that an inexperienced driver presents. It’s always a good idea to consider additional personal liability top-up cover if you are insuring your child’s vehicle - given the risk of a major claim in the event of an accident or incident where a young driver is proven to be negligent or reckless. Also specify that your child is the regular driver.
- Car hire – If you cannot live without your car, then make sure that you have car hire specified if your vehicle is involved in an accident. Also check what would happen in the event of your car hire rental period running out before your car is repaired – often the case when parts need to be imported.
- Maintain your vehicle in good working order - wear and tear and other maintenance related losses are one of the key reasons for a claim being rejected or the settlement being less than expected. Remember that insurance is there to cover sudden unforeseen circumstances which result in loss and/or damage and does not cover damage as a result of negligence or wear and tear. If you crash into a vehicle because of smooth tyres, there is a good chance that your claim could be repudiated as your vehicle is deemed unroadworthy.
- Leave valuables at home – as far as humanly possible, don’t leave valuables in your vehicle but if you absolutely must, make sure they are out of sight and locked away in the boot. Think iPods, tablets, laptops and so on – if your car is stolen, your car insurance does not cover you for these items, and if they are not insured under the All Risks section of your household contents policy, then you are seriously going to be out of pocket. Likewise, never leave house keys, gate and alarm remotes and personal details and documents in your vehicle – if your car is stolen, you may find yourself having to replace all your locks, keys, remotes and the like at home or the office to avoid becoming a victim of crime for a second time – at huge cost and stress.
“If you are correctly insured, you should be in exactly the same position financially afterwards as you were before an accident or theft involving your vehicle. But there are many instances where even financed vehicles are not insured adequately or even at all despite it being a requirement of the bank. Don’t wait until you have a mishap to find out that there are gaps in your insurance cover that could leave you compromised. Get the advice and guidance of a broker who will do a thorough needs analysis at the outset to ensure that cover is tailored to your specific requirements and circumstances, and also point out any potential pitfalls or blindsides. Commoditised, one-size fits all insurance without the guidance of professional advisor most often leaves people wanting when it comes to claims time, when it’s too late and they’re out of pocket. It’s always in your best interest to get professional, qualified advice and get your car insurance right from the outset, and avoid the inevitable costs of hindsight,” concludes Mandy Barrett of Aon South Africa.
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