What you need to know
Glossary of Car Insurance Terms and Conditions
To
help vehicle owners make sense of the jargon often used in car
insurance, here is a brief guide to motor insurance terminology.
Act of God
An unpreventable and unpredictable event
that causes loss or damage. Insurance policies often exclude acts of
God or acts of war, although they will usually cover natural disasters
such as floods.
Amendment
A change made to your original policy.
For example, if you increase the average distance you will be doing
throughout the year or the details of the regular driver.
Approved repairer
A vehicle repairer recommended by your insurance company for car repairs covered by your insurance policy.
Arbitration clause
This is a clause in your
insurance policy which states that if neither you nor your insurer can
agree on an ‘appropriate claim settlement’ you both hire a mutually
agreed appraiser to settle the dispute. The appraiser elects an
independent mediator and is neutral to both parties. A majority decision
will decide the amount of the claim.
Cancellation
Ending an insurance policy before it
is due to finish. Your insurer may charge you if you want to cancel your
policy before it is due to end. There may be a cancellation fee to pay
as well as a percentage of your premium should you cancel the policy.
Your insurer can also notify you of the cancellation of the policy.
Claims history
Insurance companies will look at
your claims history (how many claims you have made and what you have
claimed for) when deciding on what to charge for your insurance premium
or renewal premium. Your claims history provides info of the potential
risk you pose as a customer. Some insurance companies won’t look to
insure anyone who has previously made a claim.
Comprehensive cover
The highest level of car insurance cover, which usually covers you for:
- injuries to other people
- damage to other people’s property
- accidents caused by your passengers or a driver named on your policy
- the use of a trailer, while attached to your car
- fire damage and/or theft
- accidental damage to your own car
- medical expenses, up to a stated limit
- loss of or damage to personal effects in the car, up to a stated limit
Depreciation
Depreciation is a deduction for wear and tear of your possessions.
Endorsement
A change made to an insurance policy
which becomes part of the policy. For example if you change your car,
the vehicle details will be changed and your new car is insured instead
of your old car.
Excess
An excess is the first amount payable by you
in the event of a loss, and is the uninsured portion of your loss, so
when you submit a claim you’ll have to pay an excess. It usually has to
be paid to the garage fixing your car once it is repaired before you can
drive it away.
When you have to pay an excess for damages arising from an accident, it
is irrelevant who was to blame for the accident, this serves to deter
customers from submitting minor claims and/or fraudulent claims, and
keeping premiums down.
An excess is an agreed amount of money that you the client is liable to
pay in the event of a car insurance claim being settled. I.e. If your
excess on your car is R3,000.00, and the damages amount to R50,000.00
the insurer will pay the remaining R47,000.00 once you the client has
paid your excess to the repairer.
When you are comparing car insurance online, try choosing to pay a
higher excess as a way of lowering your premium. Voluntary excess is the
amount you must pay towards a claim on top of your compulsory excess.
The amount of voluntary excess is selected by the consumer when they
take out their policy, and a higher voluntary excess usually means a
lower premium. [Also view Insurance Chat]
Exclusions
Insurance companies won’t pay out for
certain risks or types of loss or damage. These will be clearly set out
in the terms and conditions of your policy and are known as exclusions.
Fault claim
An accident or loss where you are
deemed to have caused the accident or loss, or where you or your
insurance company cannot recover costs from somebody else.
Some claims will always be classed as fault claims, for example when
your car has been broken into and items have been stolen from it.
Although you haven’t done anything wrong, there is no one to recover the
cost of the stolen items from and the claim becomes a fault claim. If
your car is hit while parked, by someone who cannot be traced, this
counts as a fault claim.
Non-fault claim
A non-fault claim is simply a claim where the insurer is able to recover all their costs from someone else.
Import or imported vehicle
Vehicles made outside South Africa and brought into South Africa.
Indemnity
This is the main principle of insurance.
Insurance exists to replace something that has been lost or damaged, and
an indemnity seeks to restore the insured person to the same financial
position after the loss as immediately before.
Insurable interest
This applies to ownership of the
insured property. To insure a private vehicle, you would have to own it
and suffer a financial loss if it was damaged. You can’t for example
insure your neighbour’s vehicle. As you don’t own it, there would be no
loss to you if it was damaged. A finance company may have an insurable
interest in a vehicle if they helped pay for the purchase.
Insured value
The total amount the insurance
company will pay out for your car if it’s damaged beyond repair. This
will either be the amount you stated the vehicle was worth when taking
out the policy, or the current market value at the time of the claim –
whichever is lower.
Insurance premium
The price insurers charge for insurance cover payable monthly or yearly.
Main driver or regular driver
The person who drives
or uses the car the most is the main driver. You must tell your insurer
who this is as they will take it into account when working out how much
to charge you for your policy. If you make a claim and your insurer
finds out the main driver or rider is not who you told them it was when
you took out your insurance, they can refuse to pay your claim or cancel
your policy.
Material fact
A material fact would be information
that would affect an insurance company’s willingness to accept a policy,
or the premium it would charge. Any information that may influence
either an insurer’s decision to offer you cover or the premium they
charge for it. If you leave out information which may influence a
decision to offer cover, your policy may be invalidated.
Modifications
Any changes made to your vehicle that
are NOT classed as factory standard and made after it was produced.
This could include engine modifications, alloys, spoiler or sunroof etc.
If you don’t tell your insurance company about any modification when
you buy your policy, they can refuse to pay out if you make a claim or
cancel your insurance.
No-claims bonus
For each year you drive without
making a claim on your insurance you might get a year’s no-claims bonus,
subject to a maximum. This bonus reduces the cost of your car insurance
premium for the following year. This is also sometimes described as a
no-claims discount.
Ombudsman
The Office of the Ombudsman for Short-Term
Insurance provides consumers with a free, efficient and fair dispute
resolution mechanism. It offers consumers with a “no risk” mechanism to
resolve disputes with insurers.
Renewal
Continuing an insurance policy once its
initial term ended. For example, if you take out a 12 month policy, and
then stay with the same insurer after 12 months, your policy is renewed.
Risk
In order for any insurance company to provide
an insurance quote they must first evaluate the risk they are quoting
for – or the likeliness of a claim being submitted. This generally means
looking at the customer’s quote details and assessing them by their
claims history, the cost or type of the vehicle they drive and perhaps
the area they live in etc.
Schedule
This gives policy details of how much
cover you have (the sum insured), the discount you qualify for (if any),
the period of insurance, the premium you have to pay and the sections
that apply. With some policies you may get a new schedule when you renew
the policy or whenever you change any policy details.
Settlement
What your insurer pays out for a claim. Also described as the insurer “settling” the claim.
Stripped down policy
A budget policy which excludes
some of the benefits you’d normally associate with vehicle insurance
such as windscreen or stereo cover. It is designed to keep the cost of
car insurance as low as possible, and may have higher excess levels to
reduce the price of the policy. This is often found in policies offered
by insurance aggregators.
Sum insured
The amount paid out by the insurer when a claim is made on a policy.
Third party
Someone involved in a claim who is
neither the policyholder nor the insurer, for example if you are in a
car accident, the driver of the other car.
Third party only
Third party cover is the minimum
level of car insurance cover required by law and contains no cover for
damage to your vehicle. It usually covers your legal liability for:
- injuries to other people
- damage to other people’s property
- accidents caused by your passengers or a driver named on your policy
Third party, fire and theft
Third party fire and
theft cover provides the same level of cover as third party cover, but
protects you against damage to your vehicle from fire, or theft of the
vehicle, as long as you’re not at fault.
Underwriter
An underwriter is employed by an insurance company to decide whether to accept a risk and calculate the premium to be charged.
Underinsured
When the sum insured on your policy is
not enough to cover the maximum possible potential loss or damage – For
example insuring your car for R110,000 when the car is worth R130,000.
Insurance companies will almost always scale down claims as a result.
Uninsured losses
Any losses not covered by your
insurance policy, such as your policy excess, any out-of-pocket expenses
following an accident, eg a loss of earnings, or compensation for an
injury suffered in an accident.
Uninsured loss recovery
Your insurer offers you
assistance in recovering your uninsured losses from a third party, where
an accident is the third party’s fault.
Use (class of use)
When acquiring car insurance it
is important you have the right use for your car. If you have the wrong
use, you may find your insurance company will not pay out on a claim.
What you use your car for will have a substantial effect on your
insurance premium.
The different categories of vehicle use are:
- Social, domestic & pleasure
- Commuting
- Business use
- Commercial travelling
You are covered for day to day driving or riding, such as a visiting
family, friends or going shopping but not to drive to work. This covers
drivers for normal day-to-day driving, such as driving to visit family
and friends or shopping.
Covers drivers to drive back and forth to a permanent place of work.
Travelling to a railway station, where the car is parked, is classed as
commuting.
You can use your vehicle in connection with your job, such as driving or
riding to more than one place of work. Covers the car in connection
with your job, such as driving to different sites away from your place
of work.
You can use your vehicle for things like door to door sales.
Write-off
A damaged vehicle which is not repairable, or costs more to repair than the value of the vehicle before damage occurred.
Year built
The year that the vehicle was manufactured.
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