It’s been long since I last posted. With the recent holiday and then the wedding season, my schedule was upside down and hence was finding it difficult. But one thing is for sure, once I start, I always tend to find inspiration to blog.
Sometimes ago I wrote an article on why you must insure what will leave you broke. But insurance is one of those things that we normally only look at when we need something. You only look at taking out debt cover because you need a loan from the bank; because its a requirement. Similarly, you only take out home and car insurance because without it, the bank will not finance your deal. Because of this, we rarely have time to understand the small details in those contract. One of those aspects in insurance contract is excess payment.
An excess is the first amount payable by you in the event of a loss, and is the uninsured portion of your loss, so when you submit a claim you’ll have to pay an excess. It usually has to be paid to the garage fixing your car once it is repaired before you can drive it away.
The excess payment is often structured as the greater of a fixed fee and a % of the total claim. To give an example:
A friend of mine was recently involved in a minor accident. His contract stipulated that his excess is the greater of the 5% of the claim amount and N$3000. When he got quotes for his car to be fixed from the various dealers, the damage will cost round about N$30 000 to be fixed. Hence if you compare N$3 000 and 5% of N$ 30 000 = N$ 1 5000, he will need to pay N$ 3 000 and insurance will only cover N$27 000.
When we were looking over his contract, we also noted that there was an option for a voluntary excess amount that he did not opt for. The way excess amounts works are , the high the excess amount, the lower the premium you will pay. This is because, the higher your excess amount, the insurance pays less for any damage you do to your car. So if it was possible, an insurance with zero excess fee will mean that in an event of a loss, the insurer pays 100% of the damage. To recoup the cost of anticipated damage, the insurance will charge a higher monthly fee.
In addition, the excess is payable by the owner of the vehicle despite whether you were at fault of causing the accident or not. This is to deter clients submitting fictitious claims or even causing accident deliberately.
Next time you are looking to take out insurance, enquire about the excess fee and ensure that you understand. Be mindful of the % used in the contract. The higher the % of the total damage, the greater the risk that you are taking.
Do you know what is in your insurance contract? This made me re-look at the my home insurance contract so I know what I am liable in an event of a loss event.
Be back soon