keep wheels rolling

Reliable vehicle insurance can be just as vital as a reliable vehicle. Unfortunately, many vehicle buyers are not nearly as aware of insurance issues as of the product features of the vehicles they buy.

"Typically, they scrutinise the vehicle, from the engine to the upholstery, but don't give nearly as much attention to insurance cover," says Kgomotso Lekola, general manager: new markets at leading short-term insurer Mutual & Federal.

He says: "A vehicle, whether new or used, is often a family's second biggest investment after their house. A car might be essential for getting to and from work, yet insurance - the safeguard that will keep you mobile in the event of loss or damage - is often an afterthought.

"Vehicle insurance is not a complex subject. With a little background knowledge you can avoid pitfalls, secure appropriate cover and enjoy peace of mind."

To assist vehicle buyers, Mutual & Federal gave Sowetan some tips and insurance pointers:

l The amount of cover should be sufficient to put you back into the position you were in before damage or loss.

l The amount covered, sometimes called indemnity, may be based on "reasonable retail value" or "market value". The reasonable retail value is the current price that might be achieved when putting the vehicle up for sale. Market value is the average between the trade price - what a trader would pay you - and the retail value. Check which method applies in your case.

l In deciding the cover, an insurer considers a vehicle's overall condition and extras such as air conditioning, sound system, magwheels and accessories.

Keep a record, or even photos, of all value-adding extras as this might help to substantiate any later claim.

l Check the first amount payable - the excess - that you will have to pay in the event of a claim. Are you confident you can make this payment?

l Most insurers undertake to pay the purchase price of a new or similar vehicle should a new vehicle be written off in the first 12 months.

But an exclusion clause might state that no such commitment is made in this specific case. Check to see if any such exclusion has been written into your deal.

l When setting the level of cover, remember to allow for tax and price increases.

l Also remember that the vehicle's value usually falls from year to year. Premiums need to be aligned to cover the current value.

If your vehicle was insured on the basis of market value and this figure drops from perhaps R100000 to R75000, any settlement will be governed by the prevailing market value - R75 000 not R100 000.

You should review values and adjust premiums once or even twice a year.

l Hire purchase affects cover. A vehicle's showroom price might be R200000, but the cost of any hire purchase package also has to be covered by the insurance. This could significantly increase the total exposure - showroom price plus the cost of the credit deal. Some policies automatically cover a credit shortfall, while others offer a hire purchase top-up. Always make sure your credit exposure is covered.

Lekola says: "Vehicle insurance can be quite flexible, but don't fall into the trap of stripping the cover to the bare bones to save money.

"For example, you might be able to save on monthly premiums by opting for a high excess, but if you don't have a lump sum saved to cover the excess, you could face some delays before getting back on the road in the event of loss or damage to your vehicle.

"If you find any aspects of motor insurance confusing or your need advice, consult a professional insurance adviser. They will help to ensure your cover is appropriate to your needs."

For more information talk to your broker or call Mutual & Federal on 0860-22-55-63.