‘Read vehicle insurance terms’

2010-10-20 12:06

People must read the specific terms and conditions of their vehicle insurance policies, especially when it comes to violation cover, the ombudsman for short-term insurance said today.

“Policyholders who have the violation cover for their motor vehicle should always remember, in the event of their claim being repudiated by their insurer due to unintentional violation or non-compliance, to check with their financial institution to see if they have lodged a claim with the insurer,” Brian Martin said.

Violation cover, in general, permits the finance institution whose interests in the vehicle have been noted on the policy, to file a claim in terms of the policy where the financed motor vehicle is damaged, written off or stolen during the period of insurance, and where a term or condition of the policy has been unintentionally violated or not complied with.

This results in the claim being rejected by the insurer.

“In such cases, the violation policy usually pays for the cost of repair to the vehicle less the applicable excess (if the vehicle is repairable) or in the case of a total loss, the maximum indemnity less the applicable excess.”

Martin said it was possible for a financial institution to fail to lodge a claim in respect of the violation cover provision, or if a claim had been lodged the institution might not have advised the consumer of this.

“This leads the policyholder to believe that they have to carry the full burden of making good the outstanding amount on the finance agreement or repairs to the vehicle.”

Martin cited an example in which Mrs Smith bought a motor vehicle valued at R200?000 and took out violation cover as part of the insurance cover for the vehicle.

“The vehicle was stolen and the claim was repudiated due to a change in the risk address which occurred after the inception of the policy and of which Mrs Smith had failed to notify her insurer.”

Had her insurer been notified of the change in the risk address they would not have continued with the cover as the security requirements at the new risk address were unacceptable to the insurer.”

In this example, Mrs Smith did not check with her financial institution if a violation claim had been lodged and continued making her monthly payments to the finance house on a vehicle she no longer had.

“She had unintentionally violated the terms of her policy, but if a violation claim had been submitted, the outstanding balance in terms of the agreement would have been settled.”

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