Short-term Ombud: Unintentional violation or non compliance should not always leave you empty-handed

22 October 2010 The Ombudsman for Short-Term Insurance
Brian Martin, The Ombudsman for Short-Term Insurance

Brian Martin, The Ombudsman for Short-Term Insurance

The Ombudsman for Short-Term Insurance says that policy holders who have violation cover for their motor vehicle should always remember, in the event of their claim being repudiated by their insurer, due to unintentional violation or non-compliance, to check with their financial institution, to see if they have lodged a claim with the insurer. Violation cover, in general, permits the finance institution whose interests in the vehicle have been noted on the policy, to file a claim in terms of the policy where the financed motor vehicle is damaged, written off or stolen during the period of insurance and where a term or condition of the policy, has been unintentionally violated or not complied with, resulting in the claim being rejected by the insurer.

In such cases, the violation policy usually pays for the cost of repair to the vehicle less the applicable excess (if the vehicle is repairable) or in the case of a total loss, the maximum indemnity less the applicable excess. “What may happen is that the financial institution does not lodge a claim in respect of the violation cover provision, or that if a claim has been lodged, they may fail to advise the consumer of this fact. This leaving the policyholder to believe that they have to carry the full burden of making good the outstanding amount on the finance agreement or repairs to the vehicle”, says Brian Martin, The Ombudsman for Short-Term Insurance. An example of the workings of this type of cover is illustrated by this scenario:

“Ms. Smith purchased a motor vehicle valued at R200000, 00 and took out violation cover as part of the insurance cover for the vehicle. The vehicle was stolen and the claim was repudiated due to a change in the risk address which occurred after the inception of the policy and of which Ms Smith had failed to notify her insurer. Had her insurer been notified of the change in the risk address they would not have continued with the cover as the security requirements at the new risk address were unacceptable to the insurer. Ms Smith did not check with her financial institution if a violation claim was lodged and continued making her monthly payments to the finance house on a vehicle she no longer had. She had unintentionally violated the terms of her policy, but had a violation claim been submitted the outstanding balance in terms of the agreement would have been settled.”

“We cannot stress how important it is for consumers to read the specific terms and conditions applicable to the type of insurance cover that they wish to purchase and in the case of violation cover, to make the necessary enquiries with both the insurer and financial institution to avoid unnecessary financial burden”, says Brian.

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