The ultimate guide to car insurance

Vehicle owners are required by law to have some form of car insurance. This article will cover the various types of motor vehicle insurance as well as the benefits and limitations of the various forms of insurance.

What is car insurance

Academically, we can define insurance as the pooling of risk by the insurer. The responsibility of paying for losses is passed from the vehicle owner(insured) to the insurer(insurance company). Car insurance is therefore a means of compensation for loss suffered in the event of an accident. 

Key insurance terms

Before we get into the details, let's first get to understand some common terms that are used in insurance.

• Cover 

cover is the term used to refer to the amount of protection provided by insurance.

• Indemnity

This is the act of returning the insured to the same financial position that they were in prior to a loss.

• Policy

This is the written evidence of the terms of an insurance contract.

• Premium

This is money paid by the insured to the insurer for the protection provided by insurance.

• Third party

In insurance there are two parties to a contract. The insurer(insurance company) and the insured(vehicle owner). Thus anyone else is referred to as a 'third party'

Types of Car insurance

There are different types of insurance and these depend on the type of vehicle as well as statutory requirements. The types of motor vehicle insurance may vary from country to country but the basic forms of policy cover are:

i.) Comprehensive Cover

ii.) Full third party

iii.) Full third party, fire and theft cover

1. Comprehensive insurance

This is a form of insurance which covers:

• damage to the vehicle itself

• legal liability in respect of death or bodily injury of any third party.

• damage by fire, self ignition, lightning or an explosion

• loss or damage as a result of theft

• payment for the protection and removal of the car to the nearest repairers if it is immobilized in an insured accident

• Broken windscreens and windows are often included in the damage cover

• medical expenses which might be incurred by the occupants of the vehicle involved in an accident up to a specific limit

2. Compulsory Motor Vehicle insurance (Full Third Party Cover)

In most countries, insurance against third party risks arising out of the use of motor vehicles is compulsory. This is also known as Full Third Party insurance(FTP) and can only be issued by an 'approved' insurer.

Full third party insurance policy gives the user of the vehicle legal liability cover for the injury or loss of life (death) of any other person who is not an employee of the insured or is not a fare paying passenger.

Thus full third party car insurance is a universal policy which is meant to cover every type of vehicle and trailer. Compulsory motor vehicle insurance is provided with the same cover, wording and premiums by all car insurers.

3. Full third party, fire and theft policy

This is similar to third party insurance but it also covers damage or loss caused by fire or theft to the insured vehicle. This also includes damage as a result of self ignition, lightning or an explosion. Full third party, fire and theft insurance covers spare parts in or on the car as well. If the car is stolen and then recovered in a damaged state, the cost of repairs is covered since the proximate cause of the damage was theft.

Benefits of having car insurance

Having a great car insurance policy will help you in the following ways:

1. Compensation for losses and damage as a result of accidents

2. It is a legal requirement and will keep you out of legal trouble

3. No need to save large reserves of money to pay for possible losses.

4. Insurance premiums are invested in many areas which benefit the community as a whole.

4. Insurance provides peace of mind, since you do not have to worry about accidental losses or damage.

Common exceptions to insurance cover

There are certain conditions which car insurance generally does not cover. This means that the insurance company is not obliged to pay for compensation under any of the following circumstances:

1. If the driver does not have a valid driver's license for the vehicle being driven

2. When the insured or the person driving is intoxicated or under the influence of alcohol and drugs.

3. When the vehicle is not used in accordance with the "use of vehicle" clause of the policy.

4. Any issues arising from contractual liability

5. Employees in the normal course of their employment

6. Passengers, unless they are paying a fare

7. Losses caused by war, nuclear activity or radioactivity.

8. Costs of litigation not incurred in and not recoverable in that country.

9. Compensation for damages in respect of judgements not delivered by, or obtained from a court in the specific country.

How to get car insurance

Step 1. Research

Do your research and get quotes from various insurance providers. This will also include reading the terms and making sure you understand them. Where necessary,  seek clarification. Do comparisons of the various policies and select a car insurer whose policy suits your needs

Step 2. Contact a broker

Contact a broker or agent from your preferred insurer

Step 3. Complete the paperwork

Once you've discussed the whole policy with your broker and you are satisfied, the next step is to formalize the agreement. This will be done by filling in some forms outlining your personal details, as well as those of the vehicle being insured.

Basic contents of an insurance policy

In addition to the premiums, an insurance policy generally contains the following details:

1. Insured person's name

2. Address and business

3. Vehicle make and model

4. Trailer's make

5. Year of manufacture

6. Registration number

7. Engine number

8. Chassis number

9. Use of vehicle- this covers what purpose the vehicle will primarily serve. Use is often categorized in the following way:

    a.) Social, domestic and pleasure for cars

    b.) Business use for private cars

    c.) Carriage of fare paying passengers

    d.) Carriage of own goods for commercial purposes

    e.) Carriage of goods for reward using commercial vehicles

    f.) Motor dealers and garages

    g.) Trailers

The purpose for which the car will be used has a bearing on the amount of premiums that will be paid. This is because the different categories expose the vehicle to different kinds of risk.

10. Period of insurance

11. Premium and stamp duty

Step 4. Make a payment

Depending on your insurer, you can then start making payments for your insurance contributions.

Step 5. Get a Certificate of Insurance (Cover note)

Once you have made all necessary payments, your insurer will issue your insurance policy as well as a cover note. This is a document providing evidence that the owner of a car has insurance in accordance with statutory obligations. This might be required when licensing a car or to satisfy police in the event of an accident.

A cover note will generally contain the following details:

• Name and address of the motor vehicle owner

• Date of commencement and expiry of insurance

• The make of the vehicle as well as its registration number

• Insurance policy number

The cover note is signed and dated by a person authorized to do so by the insurer.

General terms of a private car insurance policy

1. The insured is responsible for taking all reasonable precautions and maintaining the car in a road worthy condition

2. The insured must not prejudice the insurers in subsequent negotiations by admitting any liability, making any offer, promise or payment following an accident.

3. The insured will notify the police in the case of theft or any criminal act and also co operate with the insurers in securing the conviction of the offended

4. If the vehicle is covered by multiple insurers, then each insurer will bear a proportionate part of any loss, damage or liability.

5. In instances where it is evident that the amount of a claim clearly exceeds the indemnity limit, the insurer can pay to the insured the full specified limit of its liability and relinquish any further interest in the claim from the date of payment.

How to make a car insurance claim

Step 1. Notify the police

If the accident involves another person or vehicle, then you will need to notify the police and get a police report as soon as practicable

Step 2. Inform your insurer as soon as possible

You notify your insurer by filling in a claim or accident report form.

Step 3. Fill in a claim form

Complete and send an accident report or claim form to to your insurer.

Step 4. Submit quotations for repairs

In most cases, the insurer will require you to get at least three quotations from reputable panel beaters or vehicle repair shops. In some instances the insurer might have it's own list of approved car repair shops. The quotations will be submitted together with your claim form. These will be attached to the claim form.

Step 5. Assessment

The insurer will then assess your claim to make sure it meets all claim criteria and is not in violation of the policy or any legal obligations.Once that is done an your claim is approved, the insurer might also engage an assessor to ascertain and estimate the value of the damage and required repairs.

Once everything is done the car can then be taken to the approved repair shop for repairs.

Common tips and mistakes to avoid

• Do not undervalue or inflate the value of your car so as to get lower premiums

• Report all accidents regardless whether you want to make a claim or not

• Inform your insurer as soon as the accident occurs. Do not delay

• If you are involved in an accident, take pictures of the accident scene and get the contact details of as many witnesses as possible

• Read and fully understand your policy document before committing.

Conclusion

Insurance is a way of protecting yourself from loss as a result of an accident and in some cases, fire or theft as well.

As the insured, you will need to fully understand the terms and conditions of your insurance policy.

Accidents can cause devastating losses and set you back financially. Insurance therefore provides a way of securing your livelihood in the unfortunate event that you were to be involved in an accident.