IInsurance companies are as popular as banks but life would be difficult otherwise. Without insurance, we would have no choice but to bear the full cost of a catastrophic event (house burning, car breaking down) ourselves. That’s fine if we’re really rich, poor or lucky, but not so good the rest of the time.
First published in the April 2008 issue. Street Machine
Instead, insurance allows us to share the risk of something bad happening with other people, by each paying into a much larger pool of premium money, out of which the poor buggers who would otherwise have suffered the biggest loss. They are returned.
Premiums are determined by expected outlays from the fund – how many cars are likely to get out in total – and individual risk: how much more likely your car is to get out than your mum’s Corolla. The price of your vehicle may also be a factor.
Complaints about insurance companies usually focus on the exorbitant cost of premiums, or the shortfall between actual and expected payouts when something goes wrong.
Insurance companies are not charities but if they get greedy and overcharge premiums, their customers will go elsewhere just like any other business. Well, that’s theory and it’s also practice if we shop around and compare prices, which nowadays is as easy as typing ‘car insurance quotes’ into Google.
Insurance companies increasingly specialize in market segments and may not want your business in particular, in which case they will quote uncompetitive premiums. This is particularly the case with younger drivers and older cars, which is why specialist insurers such as Shannons (modified cars and classics), Piranha (race cars) and JustCar (young people) have built for people like us. were gone
If premiums are too low, the insurance company will get a lot of business but will eventually go belly up when claims exceed premium income. That’s what happened with HIH insurance, and it caused a lot of hardship for many people whose valid claims could no longer be met.
Without TPPD (Third Party Property Damage), even a minor collision with an expensive car can send you into the poor house.
When setting individual premiums, insurers assess risk by reviewing past claims. The main factors that insurance companies find useful in predicting future claims are the make and model of the vehicle. his age; business or private use; Area Driver’s age and record; car finance; Previous history of modifications and insurance. Occupation, anti-theft devices and number of kilometers traveled may also be relevant.
Insurers reward loyalty and a good claims record with a ‘no-claims bonus’, which can reduce your premium by up to 65 per cent. Generally, a discount of 20 percent is offered on comprehensive insurance after one year, then 10 percent every year thereafter. In many cases, these no-claims bonuses are transferable, and further discounts may be available from specialist insurers for multiple cars.
Premiums are also affected by how much ‘more’ you’re willing to pay: a standard policy may require you to pay $1000 worth of damage up front, which you can reduce by paying a higher premium. . Vehicles with a notorious history of theft are usually heavily abused, as are young drivers.
Most disputes arise when expected payouts fall short, or claims are denied altogether. The devil is often in the detail, so it always pays to read the fine print. In 60% of complaints, people think they’re insured for a particular event and realize they’re not – third party insurance is a prime example – so let’s take a look at the wide range of car insurance on offer. And what do they cover?
Car insurance documents
Mandatory third party
This insurance (sometimes called a green slip) protects your vehicle against claims for injury or death to another person, assuming you or another driver in your vehicle was at fault.
It is so mandatory that you will not get your vehicle registered without it. In some states this is bundled with the car registration fee but usually you can shop around for the best price. The premium is not related to the price of the car, but to the age of the driver and the car, and whether the vehicle is covered by other insurance.
What CTP does not cover you for is damage you may cause to another person’s vehicle or property, nor does it cover injury to you or damage to your own vehicle.
Damage to third party property
TPPD insurance protects your vehicle against claims for damage to another person’s vehicle or property. If you hit another car (or house, or traffic pole) and you are at fault, you are responsible for the damage.
Without TPPD, even a minor collision with an expensive car can send you into the poor box. We strongly advise young drivers to take out at least TPPD, with the added benefit that a good TPPD record can set you up for an easy no-claims bonus when you upgrade to comprehensive insurance later. (Check with your insurer).
What the TPPD does not cover is damage to your own car, even if the other driver is at fault. Some companies offer a limited exclusion if the at-fault driver of the car is not insured.
Third party property, fire and theft.
It offers the protection of TPPD cover (above), but also covers you if your car is stolen, or written off after a fire. This is not offered by all insurance companies but is often cost-effective for young drivers who have put some money down on their cars but cannot afford comprehensive insurance.
Comprehensive is as the name suggests: it covers damage to your own car as well as damage to someone else’s vehicle or property. It also covers fire and theft but not personal injury or death.
This is the cheapest form of car insurance and can be very expensive for people with less than five years of driving experience, but if you have finance for your car, the lender will cover your needs regardless. will do
This is where you’ll find the most variation in premiums, so it’s most important that you shop around. Policy details can also vary on things like covering the cost of tow trucks, accommodation in case of a breakdown away from home, replacement cars and choice of repairer.
Agreed vs. Market Value
When you fully insure your car, it will either be at market value or an agreed price. The former is more common: If your car is written off, you’ll be paid the current average market value for that make and model.
This can sometimes come as a rude shock as some cars crash very quickly. Likewise if you own a particularly nice example of an old car, as the insurer will simply scrap it with all the rust piles. In this case it is better to insure it for an agreed price with a specialist insurer. They will ask for photos and a lot of other information, and then negotiate with you for an agreed price.
It may not match what you spent but it will be more than the market value. Agreed value policies often also have provisions that allow you to retain the debris in the event of a write-off.
Limited use/laid cover
Expert insurers recognize that some cars get very few road miles: off-street drag cars, vintage cars, show cars, hot rods, even thirsty family cruisers. If you use your car infrequently, premiums can be dramatically reduced.
These same insurers can also insure your unfinished project, to protect you against shed fire or theft during construction.
If you do not disclose the relevant information while taking the policy, the insurer cannot pay your claim, so there is no point in fumbling or telling. It is also important that you inform the insurer if the car has been modified after taking out the insurance, and that you tell the whole truth when you make your claim; If you don’t, not only could your claim be rejected, but you could also be charged with fraud.
The insurer will not pay you if you or another driver in your vehicle was driving under the influence of alcohol or drugs.