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Buying motor excesses : The true picture

Buying motor excesses : The true picture

The recent upward adjustment in motor insurance tariffs has triggered a lot of discussions, especially around persons who felt aggrieved in the past due to a few previous experiences.

A professor friend of mine, at the University of Ghana, recently called me to express her displeasure at the treatment from her insurers, after she had crashed her car into a tree stump and dented the fender. She expected her comprehensive policy to cater for the damage.

The cost of repairs and re-spraying was GH¢800, but this was not to be, as her insurers, while willing to settle the claim, also advised her to rather bear the responsibility in order to enjoy her accrued No Claim Discount (NCD) of GH¢900.00, at the policy’s renewal. While this may sound a bit frustrating, it is professionally appropriate.

As I explained to my friend, in this case, the cost of repairs and re-spraying is less than the NCD value she will earn at renewal. It will, therefore, be disadvantageous to h

 

On the other hand, if she bore the responsibility of fixing the problem, she would have NCD above the cost of repairs, which could buy excess on the policy to free her from having to contribute towards any future claim. Notwithstanding my clarification, my friend still requested to convert her comprehensive policy to third party, with limited cover at a lower premium.

Does she have a case?

Yes! She has a case and deservedly so because the damage has indeed occurred and she deserved to be paid her claim. However, if the claim was paid, she would lose the NCD of 50 per cent amounting to GH¢900.00, and also pay a higher premium upon renewal.

Moreover, she will suffer a 10 per cent excess claim deduction and reinstatement premium from the claim in certain scenarios, which will eventually reduce the claim amount.

In this circumstance, therefore, she has the right to request the claim or take personal responsibility.

Excess cover in motor insurance

The basic comprehensive motor insurance policy comes with excess, which allows the owner to also suffer some minimum cost, usually between 10 and 15 per cent, in repairing the vehicle if an accident occurs.

It is a contribution one is required to pay towards a claim if s/he makes a claim on his/her car insurance policy, especially if s/he is the one blamable for the accident. An insurer may have many types of excesses that can apply in different situations or apply concurrently.

Choose an excess that reduces your premium

Often, and naturally so, most clients will want to pay lower premiums, in which case insurers could allow them to increase their excess to reduce their premiums.

This is one of the most effective ways to save on one’s car insurance costs. However, this also means that when one does make a claim, s/he may have to pay more towards replacement or repair.

It is easy to be carried away by the potential savings with the hope that one will never have to make a claim. But one may not want to be left out of pocket when something does go wrong. This makes it important to only select a level of excess one can afford.

Meanwhile, one’s insurer can reduce the premium when s/he increases his/her excess because this shifts some risk from the insurer back to the insured. Essentially, when one’s excess is increased, it saves insurers from having to pay out numerous small claims.

What are the different types of excess?

There are several types of excess one can subscribe to and these are often listed on the certificate of insurance.

However, not every policy has the same type of excess as they don’t apply in the same situations. Insurers should make it a point to refer to the certificate of insurance for more details on excesses.

Accident damage/parts excess

This applies to the damaged portion and the cost of parts involved.

 Standard/Applicable excess

This is the amount one agrees to contribute towards the making of all claims. It is a stand-alone arrangement or may apply by itself or with another type of excess.

Under Age/Inexperienced driver excess:

This applies if the driver is under the age of 18, but has held a driver’s licence for less than 24 months. This, however, does not apply in the Ghanaian context.

Special/Additional Excess:

Sometimes an insurer may have an excess payable upon special circumstances or due to vehicle reasons that are additional to the standard excess.

When not to buy an excess

Most insurers waive the excess if the insured were not at fault and can provide the name and information about the person who was. In this regard, his/her insurer will redeem the costs from the person who was at fault.

This also means that if the fault cannot be attributable to anyone, the excess cannot be waived. For instance, if one’s car was damaged in a flood while it was parked, then, s/he will still be required to pay a basic excess.

Of course, one can add extra coverage to his/her policy so that s/he would not have to pay any type of excess for certain claims.

The way forward

The insurance is a highly technical area, as such regular stakeholder education is imperative, particularly on policy details, in order to manage fallouts from dishonoured claims.

For instance, in the context of Ghana, crisp and exciting documentaries and brochures on specific policy details and claim processing, translated in various local languages, could be used as promotion materials to help in public education.

Invariably, this will help a great deal in reducing the negative perceptions some members of the insuring public have about motor insurance in particular and other lines of insurance in general.

Until next week, “This is Insurance from the eyes of my mind.” — GB

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