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By Motoring Reporter


What to know about vehicle insurance policies

Often daunting and infuriating process can be made easy by simple understanding.

The story, or rather issue, is an all too familiar one; unhappiness or dissatisfaction with the insurance premium on one’s vehicle.

More often than not, this stems from a policy bought without reading or understanding the fine print as to where and for what the stated amount goes to.

As such, this often leads to a case being opened at the Short Term Insurance Ombudsman when matters go array.

In order to avoid confusion and ultimate anger, the office of the Ombudsman has highlighted the following worth taking note of:

  • Your vehicle’s retail value

A term often hotly debated, the retail value takes into account how much your vehicle is worth when selling it, or how much it would cost to replace if stolen or written off.

As is common knowledge, the higher the retail price, the more it will cost to insure, however, this ensures the highest possible pay-out when you claim.

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When you are paid out at the retail value, you will more likely afford to replace your vehicle with one of a similar make, model, specifications and in a similar condition.

  • What is trade value then?

Just as debated as the retail value, the trade value of a vehicle applies to the amount it would cost to buy or trade-in a vehicle to a dealer.

According to the Ombudsman, “this is generally the lowest value for which you can insure your vehicle and it is not the recommended option. However, this would still be a better option than being without insurance cover”.

  • Understanding market value

Probably one of the trickiest, the market value is determined on a vehicle’s age, mileage, condition, specification level, service history, accessories fitted and deprecation value.

Once calculated, this is then adjusted and compiled into an amount used by dealers and insurers to come up with a final price.

“If you find insuring at retail value to be unaffordable, the market value may be an option. You will probably have a shortfall when replacing your vehicle, but you will be better off than if you had insured your vehicle at trade value,” the Ombudsman says.

It, however, states that “there is also a risk that if your vehicle is still being financed, you may experience a shortfall with the finance house after the insurer has settled your claim. In other words, you may still owe the finance house monies”.

“It is, therefore, advisable that if you take this option, you do so after you have considered all the options and financial implications of each option.”

  • Shaking hands on the agreed value

As its name states, the agreed value reflects the amounts agreed upon by the insurer and seller.

A settlement that usually applies to classic, rare, vintage or special edition vehicles, the exact amount is often difficult to calculate based on any of the mentioned factors, meaning an agreement with the insurer is advised rather than debating the final amount.

“When you claim, the insurer will pay out the agreed value less the applicable excess, and depreciation would ordinarily not be considered, unless expressly provided for in the policy,” the office says.

  • Finally, don’t be afraid to ask

Given the vast array of different polices being offered, the eventual understanding boils down to the simple method of asking and explanation.

As this could lead to any added confusion or excessive amounts, asking or enquiring is key.

“It is recommended that consumers ask as many questions as possible to understand their insurance policies, read their policy documents and, when anything is unclear, seek clarification from the insurer or the broker, where one is being used,” the office advises.

“It is important for consumers to understand their own particular circumstances and what level of cover would suit them in order to obtain the most appropriate cover and avoid disappointment at claim’s stage. It is also important to remember that, as one’s circumstances change, the level of cover should also be re-evaluated and adjusted accordingly.

More details can be obtained via the office of The Ombudsman for Short Term Insurance.