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Frequently Asked Questions - Understanding Motor Insurance

Understanding Motor Insurance

Motor Insurance covers you against loss or damage to your own vehicle due to accidental fire, theft, accident, third –party bodily injury or death, third party property loss or damage. Insurance of motor vehicles against third party risks is compulsory in Kenya and it is an offense for any person to use motor vehicle without the insurance cover.

When you buy motor insurance, you contribute a sum of money called premium into a common pool. The few unfortunate contributors who suffer losses are paid out of this pool and in any case nobody wishes to be involved in a loss situation in order to be paid out of the pool. The total premium contributed into the pool has to be adequate to meet all losses suffered in any one year. In addition, other costs of operating the pool including profit for the insurer needs be met by the pool. Any failure in meeting the above costs leads to a loss for the insurer.

Generally, there are three types of cover under motor insurance.

  • Motor Third party- This cover protects you against third party losses including death, bodily injury and/or property damage.
  • Motor Third party Fire and Theft- This cover protects you against all third party risks mentioned above in addition to loss and/or damage to your vehicle due to theft and fire.
  • Motor Comprehensive- This protects you against the third party’s death, bodily injury and/or property damage as well as loss/ damage to your vehicle due to accidental fire, theft or an accident.

The first party in a motor insurance contract is you as the vehicle owner and the second party is the insurer. The third party is a person who suffers property damage or loss or death or bodily injury as a result of an accident involving your motor vehicle. A third party may be any person including a property owner, a pedestrian, a driver or passengers in another vehicle.

Indemnity

Indemnity is where your insurer places you back in the same financial position as you were immediately before the loss. This means that you cannot profit or lose from motor insurance.

Excess

Excess is the uninsured portion of the loss that you have to bear in an insurance claim. Excess is a percentage of the sum insured and is paid to the insurer for any repairs in case of accidental damages. In cases where the vehicle is stolen or is a write off/total loss, the excess shall be paid before the final claim payment to you. However, the policy may specify a minimum of excess amount.

Example: If your vehicle is insured for say Kshs. 400,000 (sum insured)and the excess is 5% of the sum insured, the excess amount will be Kshs.20,000.

How much should I insure my vehicle for?

Your vehicle should be insured for its current market value i.e. the cost of replacing your vehicle with a similar make, model, age and condition. If the amount covered is less than the market value, then the average condition shall apply.

The average condition is the penalty for underinsuring your vehicle.

Example: if the current market value of your car is Kshs. 800,000 and you buy insurance of Kshs. 600, 000 (sum insured) for the same car and you later suffer a loss of Kshs. 100,000, your insurer will pay as follows:

100,000(loss value)* 600,000(insured value)   =75,000.00

800,000(current market value)

The insurer will only pay 75,000 instead of 100,000 while you have to bear the difference of Kshs. 25,000.

You may opt to cancel your insurance cover by giving written notice to your insurer. Upon cancellation, you are entitled to a refund of your premium. However insurers will penalize you for the early cancellation. You must return the insurance cover to the insurer.

The insurance certificate will be invalid immediately the vehicle has been sold to another person. The new owner will need to take a new insurance cover for the vehicle. You may apply for the refund of the unused insurance from your insurer.

Your motor insurance will not cover the following;

  • Your own death or bodily injury
  • Damage to tyres only unless the vehicle is damaged at the same time
  • Consequential loss, depreciation, wear and tear, rust and corrosion, mechanical or electronic breakdowns, equipment or computer malfunction.
  • Loss or damage occurring outside the geographical area.
  • Loss or damage caused by or due to cheating.
  • Loss or damage accessioned whilst the vehicle is being driven by an authorized driver.
  • Driving whilst under the influence of alcohol
  • Loss or damage or liability caused by the vehicle being used for an unlawful purpose.

If you are involved in a motor accident, the general rules that you need to observe include:

• Obtaining the following details related to the accident:

                 i.      Names and addresses of all drivers and passengers involved in the accident

                 ii.      Registration numbers make and model of each vehicle involved in the         accident.

                iii.      Details of the driving license, insurance policy and certificate of the third party driver.

                iv.      Names and addresses of as many witnesses as possible

  • Taking safe actions to prevent further damages and injuries such as calling the police and moving the vehicle to safe custody.
  • Reporting the loss to the police within 24 hours of the accident if possible.
  • Notifying your insurer of the loss as soon as possible and follow this with a written notification.
  • Sending all supporting documents including Police abstract report, your driver’s license, Driver's statement of the loss immediately to your insurer

If you have a comprehensive cover, you can claim for damages to your vehicle.

  • Check with your insurer for the list of approved garages where you can take your vehicle for assessment and repairs.
  • Submit the fully completed Motor Accident Claim Form together with all supporting documents immediately to your Insurer.
  • Cooperate fully with Assessors or investigators appointed by your Insurer.
  • Do not instruct repairs unless authorized by your Insurer.
  • Submit the fully completed Motor Accident Claim Form together with all supporting documents immediately to your Insurer.
  • Cooperate fully with Assessors or investigators appointed by your Insurer.
  • Do not admit liability to the third party and /or any other party.
  • Inform your Insurer of any third party or potential third party claim.
  • Refer all third parties and/ or their representatives to your Insurer on all matters.

You cannot claim for vehicle repair costs from your own insurer if you have a third party only insurance cover. In this case you may need to claim from the insurer of the other vehicle with which you were involved in the accident. However, since you are a third party to this insurer, you should observe some conditions:

• To notify your own insurer of the loss.

• To notify the insurance company against which you are claiming as a third party.

• To follow the instructions given by both insurance companies and submit all supporting documents they may call for.

•Report to the police immediately.

•Notify your Insurer by telephone within 24 hours of discovery of the theft where applicable.

•Submit a duly filled Claim Form.

  • Follow the instructions given by your Insurer and cooperate fully with them during the course of investigations of the theft.

This is an incentive to you for not making a claim during the preceding period of motor insurance.

The discount is given according to the class of motor insurance. For example, the discount given when you renew our private motor insurance is as shown:

Third Party Only………………………Nil

Third Party Fire and Theft………….2nd Year -10%

3rd Year -20%

Comprehensive ………………………….2nd Year – 10%

3rd Year – 20%

4th Year- 30%

5th Year- 40%

                            6th and subsequent Years- 50%

If you insure more than one motor vehicle with the same insurer, the No-Claim Discount shall be applicable to each such Motor Vehicle as if separate policy had been issued. No-Claim Discount is not transferable.


Do

  • Disclose all material facts on the risks to be covered.
  • Answer all the questions fully and accurately.
  • Complete and sign the proposal form yourself.
  • Establish the market value of your vehicle by having it valued preferably by a Motor Assessor.

Don't

  • Leave any question in the proposal form unanswered.
  • Withhold or misrepresent any material facts otherwise the certificate of insurance will be void and claim can be repudiated.
  • Underinsure, as you will be penalized by the application of Average in the event of a claim.