Q & A INSURANCE MYTH

Welcome to My First Q&A Post on Motor Insurance!

I am very excited to kick off a new and engaging series. Questions and Answers just for you! Whether you are an existing insurance policyholder or just beginning to explore the world of insurance, this Q&A post aims to address common concerns and misconceptions about insurance.

In this first edition, I will dive straight into some pressing queries about motor insurance. From understanding coverage options to getting the best rates. So, I encourage you to prepare for an informative ride with theinsuranceguarantor.  Below, you’ll find a list of top questions and their answers to assist you in making informed motor insurance decisions.

 Q1: Is third-party insurance enough for my car in Nigeria?

A1: Third-party insurance is the minimum legal requirement in Nigeria and covers damages or injuries you cause to others. However, it doesn’t cover damage to your own vehicle. Comprehensive insurance provides broader protection, including your car and third-party liabilities. Therefore, you should consider comprehensive motor insurance. It offers more extensive coverage and peace of mind.

Q2: Does comprehensive insurance cover everything?

A2: Comprehensive insurance in Nigeria covers a lot, including fire, theft, accidental damage, malicious acts, and third-party liability. It can also be extended to cover floods, riots, strikes and civil commotion etc. Nevertheless, there are standard exclusions such as claims arising from contractual liability, for instance, a contract of employment, liability incurred outside the specified geographical area, or liability incurred when the vehicle insured is used for purposes not declared in the policy, like using a private car for commercial activities.

Q3: Is comprehensive car insurance a waste of money if I have an old car?

A3: It depends on the personal value of the car to you and your financial situation. Comprehensive insurance covers loss or damage from theft, fire, vandalism and accidental damage. If the cost to insure the vehicle exceeds its economic value to you, it might not be worth maintaining comprehensive coverage. You might opt for the legally required minimum, which is third-party only.

Q4: Will my insurance cover a friend who borrows my car?

A4: Typically, yes. Most motor insurance policies cover anyone driving your car with your permission. However, any claim arising therefrom would be made against your insurance which may potentially affect your renewal premium. It’s important to understand the specifics of your policy.

Q5: Does the cheapest insurance policy offer the best value?

A5: Not necessarily. The cheapest policy often provides limited coverage, which could leave you exposed to significant financial risks. Balancing cost and coverage is vital to ensure sufficient protection.

Q6: Will my motor insurance cover theft?

A6: Theft is covered under comprehensive insurance but not under third-party insurance. Comprehensive insurance covers a range of risks including theft, fire, and damage to your vehicle from various incidents.

Q7: Can my insurance claim be denied if I was at fault in an accident?

 A7: Whether you are at fault or not, comprehensive insurance will cover your own vehicle’s damage. However, third-party insurance will only cover damages to the other party’s vehicle or property if you are at fault.

Q8: Is it true that the insurance company will replace my car if it’s declared a total loss?

 A8: If your car is declared a total loss because it is uneconomical to repair, the insurance company will pay you the market value of your car at the time of the accident OR the sum insured whichever is less. Not the cost to replace it with a brand new one. What is paid is usually based on the car’s pre-agreed depreciation rate and current market value. Motor insurance is a contract of indemnity, so total loss claim payment is subject to the current value of your vehicle as at time of loss or damage

Q9: What does indemnity mean in insurance?

 A9: Indemnity in insurance refers to the insurer’s obligation to restore the insured to the exact financial position they were in just before the loss or damage occurred. In essence, you are compensated for exactly what you lost, within the limits of your policy terms and conditions. All insurance contracts are indemnity contracts except for life and personal accident insurance, as no monetary value can adequately compensate for the loss of life or pre-accident health.

Q10: Does my motor insurance cover damages from natural disasters?

 A10: In Nigeria, standard motor insurance policies do not cover damage from natural disasters such as floods, landslides, tidal waves, earthquakes, etc., except there is a specific extension for such coverage.

Q11: How are motor insurance premiums determined and calculated?

 A11: Insurance premiums are calculated considering factors like coverage type (third-party or comprehensive), vehicle value, vehicle age, driver’s age and driving record, primary location of vehicle use, and previous claims. Since January 2023, the National Insurance Commission (Naicom) has set a minimum premium rate of 5% of the sum insured for comprehensive coverage and a flat rate of N15,000 for third-party coverage. Insurers in Nigeria cannot charge a premium below this 5% rate for comprehensive coverage.

 Example:

Premium Calculation for Private Motor Insurance in Nigeria:

–         Sum Insured: N10,000,000.00

–         Minimum Premium Rate: 5%

–         Premium Payable: N10,000,000 x 5% = N500,000.00

 Q12: Can I transfer my motor insurance policy to a new owner?

A12: In the Nigerian insurance market, the transfer or assignment of a motor insurance policy to a new owner is generally not granted. Instead, the new owner would need to purchase a new insurance policy for the vehicle. The process usually involves:

• Cancelling the Existing Policy: The seller should cancel their motor insurance policy after selling the vehicle. The insurer may offer a refund of the premium for the unused policy period on a pro-rata basis.
• Purchasing a New Policy: The buyer is required to purchase a new motor insurance policy, providing necessary documents such as vehicle details and personal information.

 In contrast, some other markets like India and the UK might permit the transfer of a motor insurance policy to a new owner under specific conditions, involving:

• Submission of a transfer request by the new owner, along with sale evidence, the new owner’s details, and a No Objection certificate from the current policyholder.
• An inspection by the insurer and potential premium adjustment based on the new owner’s risk profile, may follow with a policy endorsement.

 Q13: Does my private motor insurance cover the use of my car for commercial purposes?

A13: Standard private motor insurance policies typically do not cover the vehicle for commercial use. If you intend to use your car for commercial purposes, you need to inform your insurer and switch to a commercial motor insurance policy. This will ensure you are adequately covered. The usage limitations are generally indicated on your insurance certificate. Please read and be guided accordingly.

 Q14: Will my motor insurance cover me while driving another person’s car?

A14: Not necessarily. Your motor insurance typically covers only the vehicle listed on your policy.

Q15: Are older cars cheaper to insure?

 A15: Not necessarily. The cost of insuring a car depends on various factors, such as its value, repair costs, and theft likelihood. Although older cars may have lower market values, they can sometimes be more costly to insure due to higher repair costs or unavailable repair parts.

Q16: What should I do if I’m involved in a car accident?

A16: If you’re involved in a car accident, you should:

1. First, ensure everyone’s safety and seek medical attention if needed.
2. Report the accident to the police and obtain a report if a third party is involved.
3. Collect the insurance certificate of the third party if the third party is at fault
4. Take pictures of the incident for records where possible
5. Notify your insurance company as soon as possible.
6. Provide all necessary documentation and information required by your insurer for claim processing.

Q17: Does my insurance policy cover tyre damage without an accident?

 A17: Typically, standard motor insurance policies do not cover tyre damage due to wear and tear, punctures, or other routine issues unless it occurs as part of an accident involving other vehicle parts. If your tyres are damaged in a collision or due to an insured peril (e.g., fire, theft, vandalism), your insurance may cover repair or replacement costs. However, coverage for tyre damage can vary based on your policy’s specifics. Some insurers may wish to offer additional coverage for tyres, so it’s worth inquiring if tyre coverage is important to you.

Q18: Does my insurance policy cover general wear and tear to my vehicle?

 A18: Standard motor insurance policies generally do not cover general wear and tear to your vehicle. Insurance is designed to protect against sudden and unforeseen events, not the gradual deterioration that occurs over time through normal use.

Wear and tear refer to the gradual degradation of vehicle parts such as tires, brakes, and batteries due to regular use and aging. Most motor insurance policies do not cover wear and tear. Vehicle owners are responsible for their vehicle’s maintenance and addressing any wear and tear issues.

 Q19: Will my premium increase if I make a claim?

 A19: It is possible. Filing a claim may lead to a higher premium upon renewal, as insurers might consider you a higher risk. This varies based on the claim type, the insurer’s policy, and the market. Some insurers offer a “no-claims bonus” for not making claims over a certain period.

 Q20: Is it cheaper to pay my motor insurance premium annually rather than monthly?

 A20: In the Nigerian insurance market, paying annually is common practice and not necessarily less expensive than monthly payments. You may opt for a lump sum or instalment payments with your insurer’s consent. In other markets, paying in full may be cheaper due to discounts for administrative costs and guaranteed full premium payment.

 Q21: Does motor insurance cover personal belongings stolen from my car?

A21: Comprehensive motor insurance may cover personal belongings stolen from your car, but this is not guaranteed and often comes with limitations. Some policies might include this coverage, while others might require additional endorsements. You may wish to consult your insurer or policy document specifics.

 Q22: Can I transfer my no-claims bonus to a new insurer?

A22: Yes, for insurers and markets that offer no claim bonus (NCB). Many insurers will allow you to transfer your no-claims bonus (NCB) when you switch providers. This bonus is typically a discount awarded to you for not making any claims over a certain period. Ensure you obtain proof of your NCB from your previous insurer to present to the new one.

 Q23: Is motor insurance more expensive for younger drivers?

 A23: Generally, yes. Younger and less experienced drivers are often viewed as higher risks by insurers, leading to higher premiums. However, as drivers accumulate experience and maintain a clean driving record, their premiums may reduce over time. This varies with the insurer and the market you are in, so it’s important to understand the details of your policy.

 Q24: Does motor insurance cover towing costs?

 A24: Coverage for towing expenses under motor insurance depends on your policy’s specifics and your insurer. Usually, standard motor insurance policies do cover towing, but there may be limits and conditions. It’s essential to know the details of your policy.

 Q25: Is third-party insurance coverage unlimited?

 A25: Third-party motor insurance coverage is typically not unlimited in most jurisdictions. It often has limits on property damage, while coverage for death and bodily injury caused to a third party may be unlimited. These limits vary by policy and legal requirements. For instance, in Nigeria, the liability limit for third-party property damage is now N3,000,000 for private cars. Review your policy to understand the coverage limits and terms of your third-party motor insurance. If the coverage limits seem insufficient, consider discussing higher limit options with your insurer for an additional premium.

 Conclusion

I trust this Q&A has helped clarify some aspects of motor insurance. Should you have further questions, require assistance, or wish to provide feedback on this post, please share your thoughts in the comments section or contact theinsuranceguarantor directly. I would really love to hear from you and don’t hesitate to visit my blog for prior insightful posts on insurance and related topics.

 Thank you for reading, and I eagerly anticipate your continued engagement!

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 The upcoming Q&A episode will be featuring 20 practical questions on Motor insurance claims. Make sure not to miss it!