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Vehicle owner protection policies are largely misunderstood

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According to Arrive Alive, lack of consumer education is the biggest challenge facing the insurance industry. With a majority of the complaints to the Ombud for short-term insurance coming from consumers who are found not to understand the products they are using, it’s important to get to know the basics. Whether your business makes use of one vehicle or 100, you need to know The Difference Between Car Insurance and a Motor Warranty, what you can and cannot claim for, and how your insurance is classified. This will help you avoid unnecessary frustrations and delays, or even rejections of a claim. Written in collaboration with Hippo.co.za, here is the difference between these two policies.

Car Insurance

Car Insurance is a policy taken out as soon as a driver takes ownership of a vehicle. This policy, paid by the owner through monthly premiums, protects them financially in the event their vehicle is stolen or damaged in several ways or they are liable for damage to a third party's property. It is important to note that if a vehicle needs repairs, the insurance company will pay out an amount based on the type of car insurance and premiums the owner pays. It is also important to note that, if a vehicle is bought for business purposes, you will find cover for it under Business Insurance.

Monthly insurance premiums may depend on a number of factors which include, but are not limited to:

  • Make, model and year of the vehicle
  • The excess amount selected
  • Whether or not the cost of repairs is more than the total market value of the vehicle
  • Whether or not the vehicle is kept inside a garage or outside
  • Whether or not the vehicle is fitted with tracking devices
  • Age, gender, driving experience and driving record of driver
  • Type of business activity the vehicle is used for
  • Amount of time the vehicle spends on the road

Insurance companies in South Africa offer three basic types of policies which can be tailored for business vehicles:

  1. Comprehensive insurance that covers damage to a vehicle, fire, theft and damage to any third party vehicles involved in an accident;
  2. Third party only that only offers cover to a third party and their vehicle where you are liable for an accident; and
  3. Third party, fire and theft car insurance that covers not only the third party after an accident, but also offers fire damage and theft cover for your vehicle.

Having vehicles on South African roads without insurance is a high risk to businesses, but it is not enough to take out a policy without knowing what it entails. It is vital to know exactly what type of policy you have and what it covers. Apart from keeping up with monthly payments, keep in touch with your insurance company annually. Vehicles lose value year on year, so make sure your business vehicle or vehicles are insured for their current value. If you make a claim on one of your vehicles, you will only be paid out for what it or its parts are worth at the current market value. Therefore insuring it for more than what it’s worth is unnecessary.

Motor Warranty

A manufacturer’s motor warranty, while also a form of vehicle owner protection, is a legal statement provided by the manufacturer of a vehicle that its parts will last as long as they stipulated. If a part malfunctions or breaks within the amount of time set by the warranty, the part will be fixed or replaced at no cost to the owner. New vehicles will come with a warranty which will expire after a certain date or a certain mileage has been reached, whereafter you can opt to extend your motor warranty through the manufacturer itself, alternatively through a different Short-term Insurer or Warranty provider. Unlike car insurance, where any damaged parts are paid for in part or whole by an insurance company, the onus with regards to motor warranty is on the manufacturer, alternatively the selected warranty provider.

If the motor warranty expires on your business vehicle, it can be renewed or extended either through the manufacturer itself or you can apply for an extended or pre-owned warranty through a short-term insurance or warranty provider, in order to cover the cost of broken parts.

If you opt for an extended warranty through a provider other than the manufacturer of your vehicle, the warranty is no longer a manufacturer’s warranty.

There are two types of motor warranty:

Pre-owned Warranty - This type of policy can be taken out if the warranty from a manufacturer has already expired. It will cover the repair or replacement of any parts specified in it.

Extended Warranty - This type of policy can be taken out in addition to the current manufacturer warranty. This warranty adds breakdown cover, where a vehicle has broken down due to mechanical reasons.

Motor warranty does not provide cover for any damage to your vehicle if you are responsible for damage to a third party’s vehicle, and does not provide accident cover.

There are a number of vehicle owner protection policies out there that can be tailored to suit the unique needs of any business. With this in mind it’s always advised to contact a service provider and discuss the type of cover you would need for your business vehicle/s. If you already have some form of policy but are unsure of what cover your vehicles currently have, get in touch with the relevant company and ask them what you are paying for. You might find your cover is excessive, or isn’t enough for the activities your business undertakes. Keeping yourself, as the business owner, aware of your vehicle's cover will reduce your risk of paying for unnecessary features and your risk of making uninformed claims.

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