Know what is covered as well as how much coverage you have. - File Question:
I AM a public servant. I have been driving a government-owned vehicle for seven years. The car I have been driving for the last three years has been offered to me for sale under a new policy. The selling price will be based on its book value. I will be responsible for licence and insurance. Most people I know seem to have had problems with insurance. Can you please give me an insight into motor insurance? I know nothing about it. How can I save money and avoid the more common problems?
- P.J., Kingston 5.
Answer:
"Nuff respect!" There are two reasons for this greeting. The first is due to the similarity between your initials and the first two initials of the most honorable gentleman who, "has never got the respect where respect is due". The second is you have earned my esteem. You are doing homework before making a decision. Most persons lock the gate long after the horse has bolted and end up feeling dissed.
MOTOR INSURANCE BASICS
Motor insurance is required by law. Section 4 of the Motor Vehicles Insurance (Third-Party Risks) Act says, "it shall not be lawful for any person to use, or to cause or permit any other person to use a motor vehicle on a road, unless there is in force in relation to the user of the vehicle - such a policy of insurance in respect of third-party risks as complies with the requirements of this Act."
In order to comply with the Act, motor policies should, among other things, cover:
The death of, or bodily injury to any person, subject to a limit of $250,000 any one person or $1,000,000 any one accident;
Damage to property caused by, or arising out of the use of the motor vehicle on the road, subject to a limit of not less than $30,000 any one person and a total liability of $250,000 for any one claim.
The limits in the Act are minimum amounts. Where the owner of a motor vehicle buys insurance to comply with the Act, he will not be "let off the hook" if someone succeeds in bringing an action against him for amounts in excess of the limits. I know of several cases where claims have been brought directly against persons for amounts in excess of the limits in their policies. Those persons have ended up having to find lots of money to settle judgment debts. Do not be fooled into buying coverage for the limits in the Act. It could come back to haunt you.
Insurance companies offer three types of motor policies. They are comprehensive, third party fire and theft and third party. Third party insurance provides minimal protection. It is usually the cheapest of the three. Coverage tends to exceed that laid down in the Act. Premiums run between $15-20,000 for a mid-range vehicle. Third party insurance excludes collision damage. Third party fire and theft is a step up from a third party. It provides protection when the vehicle is stolen or damaged by thieves. Loss or damage by fire is also covered. Add, say three percent of the vehicle's market value for these extras which are sold together.
Comprehensive is the top-of-the-line but does not mean everything is covered. These policies have exclusions like all insurances. The difference between this and the other policies is that this one covers collision damage. The others do not. If another car were to crash into your vehicle, your insurers would pay the repair costs. Premiums for this coverage are more costly than the other two. Budget around 6.5 to 8.00 percent of the market value for the premium.
TIPS FOR SAVING MONEY
AND AVOIDING PROBLEMS
1. Get a valuation from a reputable professional and insure your vehicle for the recommended amount, assuming that you buy comprehensive coverage.
2. Seek quotations for a limited number of drivers instead of opting for open driving, if this is consistent with your life style.
3. Consider carrying a bigger excess in exchange for a discount in preference to the standard excess.
4. Many insurers offer special discounts for civil servants. Make sure that you claim your discount.
5. Some companies offer discounts for anti-theft devices. Explore this if it applies to you.
6. Get a letter from the company that presently insures the vehicle you drive giving details of your accident records. If you have had no accidents over the last three years you may get a no claims bonus.
7. Examine the policy documents and application form in detail before you make a decision. If the contract is not written in plain English and the salespersons do not appear to know what they are talking about, forget it.
Best of luck to you.
Cedric E. Stephens provides advice on risks and insurance. If you need free information or advice to solve a
problem, write to The Financial Editor or, contact Mr. Stephens directly at aegis@cwjamaica.com
