Why your car insurance doesn’t pay for everything, even when you pay them to

Vehicle repair costs in South Africa are going up, making car insurance crucial, but no matter how much you pay, insurers will still expect you to cover shortfalls and excesses.

Funeka Ngewu, Executive Head of Claims and Procurement at Momentum Insure, explained that many South Africans only discover how an insurance excess works when they need to submit a claim.

“Whether it is a vehicle accident, storm damage or a burst geyser, being asked to pay an excess upfront often comes as an unwelcome surprise,” she said.

“Understanding how excesses work before something goes wrong can help you choose the right cover, avoid unexpected costs and make the claims process far less stressful.”

An excess payment is the portion of a claim the insured party agrees to pay before the insurer covers the remaining repair costs.

Depending on the policy, this amount is either deducted from the settlement amount or paid by the insured party directly to the repairer.

That said, if the claimed amount is less than the excess amount, insurers will not pay for the repairs, since the full amount falls within the agreed excess.

“The main reason insurers apply an excess is to help keep the cost of insurance affordable. Insurance is intended to protect you against major financial losses, not every small expense,” explained Ngewu.

“When policyholders contribute towards the cost of a claim, it helps manage the overall cost of claims across the insurance pool, which in turn helps keep premiums lower.”

She said it also encourages people to take reasonable care of their homes, vehicles and other insured belongings.

Depending on your insurance policy, different types of excesses may apply:

• Standard excess: The fixed amount you pay when you make a claim as set by your insurer. 
• Voluntary excess: An additional amount you choose to pay, above your standard excess in exchange for a lower monthly premium.
• Additional excess: This may apply if the risk is higher, for example, if the driver is under 25 or has a licence for under two years.
• Imposed excess: This may be added if you have a history of frequent claims for the same issue.

“Insurers should clearly explain which excess applies to your policy when you take out cover, in which cases additional excesses could be applicable, and inform you of changes to the excess during the life of your policy,” Ngewu explained.

Depending on your choice of insurer and the cover you choose, it may be possible to add an excess waiver.

“This allows you to pay a slightly higher premium in exchange for reducing or eliminating your standard excess when you claim,” she added.

Claiming when it wasn’t your fault

Ngewu explained that if someone else was responsible for your loss, there is a chance you get your excess back.

“Your insurer may attempt to recover the cost of the claim, including your excess, from the responsible third party or their insurer. If the recovery is successful, your excess will be refunded,” she said.

That said, insurers may not be able to pursue recovery in every case, but will let their client know if this is the case.

“Depending on the circumstances and with your insurer’s agreement, you may also be able to recover the excess directly from the responsible third party,” Ngewu explained.

She added that at the end of the day, understanding your type of cover and the conditions associated with it makes the biggest difference.

“Insurance is there to protect you when life takes an unexpected turn, and understanding how your excess works is an important part of that protection,” Ngewu explained.

“Before taking out or renewing your policy, ask what excesses apply, whether you have options to adjust them and what you can expect if you need to claim.”