South Africans excited to pick up their new wheels after finally finding a good deal should ensure that they have full insurance coverage before driving out of the dealer doors.
Should you neglect to do so and subsequently get into an accident, you may be in for a heartbreaking surprise.
If you purchase a vehicle at a dealer, whether it be pre-owned or fresh from the factory, and it’s financed in full or in part, the bank usually instructs the seller not to release the car until the buyer, or the dealer’s finance and insurance division, can provide proof of full insurance.
The letter assures the bank that should the vehicle be stolen or written off shortly thereafter, its client would still be able to service their debt.
However, this letter alone is not a total assurance that you are already covered, as protection only takes effect once you have made your first payment to the insurer.
If you have not completed the payment before taking delivery of your new ride, you stand the risk of not being covered in the event of an accident.
Happiness to heartbreak in 48 hours
Consumer Ninja Wendy Knowler recently brought to light a case in which a Gauteng couple was caught up in insurance limbo after buying their first car together, a 2021 Kia Rio, which they financed for a period of seven years.
They picked up the vehicle on a Saturday, and just two days later, on Monday, the husband got into a serious accident and the Kia was declared a write-off.
The couple approached their insurer believing they were covered for the incident, but their claim was denied on the grounds of non-payment.
The couple applied for insurance on 21 October 2024 and asked that the insurer debit the monthly payments on the 31st of each month, with the accident taking place within this 10-day period in which the insurer said they were not covered.
Gobsmacked, the couple contacted Knowler to ask for assistance, who in turn got in touch with the insurance company to ask for clarification on its stance.
“I did take this up with [the insurer], and they pointed out that insurance is paid for in advance not in arrears,” Knowler told 702.
“That’s why if you buy the car on the 12th or the 7th or whatever, you need to pay what they call a pro-rata amount, which is just a proportion of the month to take you until the end of [the month].”
As such, the cover provider was within its rights to deny the couple’s claim as they had inadvertently neglected to pay the pro-rata fee of approximately R550 which would have seen them enjoy protection from the 21st to the 31st of October, when the first full month’s payment would be taken.
The insurer also said it tried to deduct the pro-rata payment three times on the Monday, the day of the accident, but each attempt was unsuccessful.
The couple argued that they were unaware of this particular requirement and were under the impression that they were fully insured after receiving an insurance confirmation letter from their provider, which was delivered to them despite not paying a pro-rata fee.
“I’ve said to [the insurer], why not only issue that letter of confirmation once the pro-rata amount has been paid, then everyone’s got absolute assurance that as you drive off, the car is insured,” said Knowler.
“But, I was told by [the insurer] that it’s impossible for insurance companies to wait for confirmation of valid payment of the pro-rata premium before sending the letter.”
In the vast majority of cases, the client is already waiting at the dealership to take delivery of their new vehicle when requesting an insurance confirmation letter, and they therefore need it as soon as possible, the company explained.
However, the pro-rata is usually deducted at midnight or on the first business day after the client has applied for insurance.
Additionally, the industry-standard “grace period” of 30 days, which states that clients will still be covered for 30 days after missing a payment, does not apply to pro-rata fees and neither to the first premium deduction, so it couldn’t be called upon by the begrieved couple.
Unfortunately, Knowler indicated that the couple has no leg to stand on in this case due to this oversight and they will be paying off the Kia Rio for the next seven years despite it being written off.
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