You ought to have some idea what the insurance policy on you valuable car covers. After all, your car is the most precious of your visible assets, not to mention that the premium you pay is no paltry sum.
First, I hope you bought your policy through an insurance agent or broker who makes his living, and a good one at that, selling insurance. You used him to negotiate the best terms for you. More important, you will need his help if ever you have a claim on your policy. The car salesman or dealer may give you what appears to be a good deal, but insurance is merely his sideline.
Now for the policy itself. The thing to keep in mind always is that whoever drives you car must be duly licensed to drive. This simple rule can sometimes be sticky. For example, if you somehow got your spoiled underage son a driver’s license, the policy is not in force every time he drives the car.
The policy has two parts: (1) Loss or Damage, and (2) Third Part Liability.
Loss or damage. More commonly called Own Damage (OD) refers to damage to your car and its accessories and spare parts resulting from perils listed in the policy. The most common perils is accidental collision or overturning. Then, there are: fire, explosion, self-ignition or lightning, burglary, theft, malicious act.
When you buy your policy, you have to put down your estimate of the value of the car and its accessories. This value is the maximum limit of liability under the policy. When the car is brand new, there obviously is no problem determining the value. If the car is no longer new, you can rely on the valuation of the insurance company.
If your car is damaged in an accident, call your broker right away. He will arrange to have an adjuster on the scene if possible. If you have to make a statement at the police station, it is better if the adjuster is around to help you.
If the car is towed to a repair shop, the policy will pay the towing charge up to the amount set in the policy.
In every Own Damage claim, you have to bear the deductible specified in the policy. For example, if the deductible is P3,000, this amount is deducted from your claim.
The company has the following options: pay you the amount of the damage in cash, or repair, reinstate or replace the damage. This rule applies whether the claim is total or partial.
In case of a partial loss, the company has also the right to choose the repair shop, In case of a total loss, the company may decide to pay you the maximum limit set in the policy and to keep the wreck. Or, the company may decide, subject to your acceptance, to pay the maximum limit less the agreed value of the wreck, and you get to keep the wreck.
The stickiest problem in an Own Damage claim is depreciation, the loss in value of the car and any of its parts because of wear and tear. This problem goes into one of the basic principles of insurance, the principle of indemnity. This principle says: the insured is to be paid only what he has lost; he is supposed to be restored to the same financial position he was in before the accident and he is not to profit from his insurance.
But depreciation is not all that easy to compute. Obviously, the wear and tear of a car used by an elderly widow to go to daily Mass is much less than that used in a car pool for the students in the neighborhood. The owner who does not follow the maintenance chart of the manufacturer will wear out his car faster than one who checks in his car at the service center as scheduled. As a result, ten appraisers can come up with ten different valuations on the same car.
In practice, depreciation is agreed upon through negotiation and here is where your agent or broker uses his clout on the company to work out the best deal for you.
Third Party Liability. The second part of your car insurance policy covers Liability to the Public, or Third Party Liability (TPL). If you sideswipe a pedestrian with your car or you ram your car into your neighbor’s fence, this is the section in you policy under which you file your claim.
TPL is in two sections: Compulsory Third Party Liability (CTPL) and Voluntary Third Party Liability (VTPL).
CTPL is what you are required by law to buy. Otherwise, you will not be able to register your car, You can buy CTPL alone just to be able to register your car. But if all you have is CTPL you are courting deep trouble. You are flirting with bankruptcy.
The limit under CTPL is miniscule, as low as P20,000 depending on the type of car. This limit applies whether one or more third parties are hurt in an accident. Also, there are the so-called inner limits this cuts down this maximum. For example, if your victim dies, the policy will pay only P12,000 as death benefit and P4,500 for burial expense. If the victim survives, and lands in hospital, the policy will pay specific sums to the surgeon and the anesthesiologist, the use of the operating room. Under the worst case, you can collect P15,750.
The damage to your neighbor’s fence is not covered under CTPL. If you rammed into another car, the damaged you caused is not also covered.
So, if all you have is CTPL and you cause a major accident resulting in a total loss of an expensive car and the death of several people, you can land in the poorhouse if not in jail.
In a head-on collision there is no need to prove who is at fault, provided the liability does not go beyond P5,000 for bodily injury per person. The CTPL on each vehicle will pay. This is what is called the No-Fault provision of the policy.
It is then essential that you have Voluntary Third Party Liability (VTPL), formally called in the policy as Excess Liability Insurance. As the name implies, VTPL is not a standard provision. It is an option that you have to ask the company to put on the policy. When your actual liability goes beyond the CTPL limits (nowadays that means every time you cause an accident), VTPL takes over.
How much VTPL you should have? As much as your insurance company is willing to cover you for. However, some companies do not like to set very high limits. If you are not happy with the VTPL limits that your company is willing to cover you for, ask your broker to get you a company that will offer more.
The premium on VTPL is so small that it is foolish for any car owner not to have it. Ask your broker for a quotation.
Your VTPL follows you if you drive a friend’s car. It does not follow you if you drive a car you have hired from a rental company.
All the above, gives you the basics. Leave the finer points to your insurance broker. And if ever you have an accident, the best thing to do is to call your broker right away. Your call might get in the way of his golf game, but his job it to help you in your hour of need.
Before 1974, when two cars collided and the passengers got hurt and neither driver admitted fault (and have you ever met a driver who did admit fault?) and each car was insured with a different company, no one’s claim for bodily injury could be paid until it was determined, sometimes by the Court but often times by mutual agreement between the two insurance companies, who was the culprit responsible for the accident.
If a car hit a pedestrian, the insurance company could withhold payment of the claim until it was determined that the accident was avoidable and, that, as a result, the car owner was liable.
In the meantime, these injured had to pay the hospital bills first from out of their own pockets. It was all according to the motor vehicle insurance policy.
Then, in 1974, the Insurance Code was extensively rewritten. One of the several new chapters added was Compulsory Motor Vehicle Liability Insurance. This chapter, copied from the New York Insurance Code, required every motor vehicle, including the lowly tricycles, to carry Third Party Liability Insurance prior to registration.
Part of this chapter is the no-fault section. No-fault insurance means that any claim for death of injury to any passenger or third party shall be paid without the need of proving fault or negligence of any kind.
In the case of an occupant of a vehicle, the claim will be against the insurer of the “directly offending vehicle”.
The most that an insurance company will pay under the no-fault clause is P5,000 any one person.
To make it even easier to prove a claim under the no-fault clause, the Insurance Code says that it is enough to submit to the insurance company (a) the police report, and (b) the death certificate and evidence to establish the proper payee, or (c) the medical report and the medical and hospital bills.
The insurer that pays under the no-fault clause retains the right to recover against the owner of the vehicle responsible for the accident.
When the fault is clear-cut, as when a car that is properly parked is rammed, the no-fault clause does not apply. The claim will have to be settled directly by the insurer of the offending vehicle.
The no-fault clause never applies to damage to the vehicle or any other property.