Many Nigerians are travelling out of the country in droves for various reasons. In this era of “Japa” syndrome, JOSEPH INOKOTONG presents some precautionary insurance tips.
Insurance is a means of managing one’s risk. When an insurance policy is bought, the person purchases protection against unexpected financial losses. The insurance company pays the policyholder or someone he chooses if something bad happens to the holder, according to the Building Blocks Student Handout
However, if one has no insurance and an accident happens, the person involved may be responsible for all related costs. Having the right insurance for the risks one may face can make a big difference in life.
Experts say people get insurance not only to help with risks from unexpected events but also to help pay for routine things, such as annual medical checkups and dental visits. In addition, insurance companies negotiate discounts with healthcare providers, so their customers pay those discounted rates.
An insurance policy is a written contract between the policyholder (the person or company that gets the policy) and the insurer (the insurance company). The policyholder is not necessarily the insured. An individual or company may get an insurance policy (making them the policyholder) that protects another person or entity (who is the insured). For example, when a company buys life insurance for an employee, the employee is the insured and the company is the policyholder.
How does insurance reduce financial risk?
This can be explained with a simple illustration: “Imagine you’re driving your car and you hit a deer, which damages your car. If you have the right kind of auto insurance policy, the insurance company will pay the costs of the car repairs (minus the deductible – the portion you have to pay). Also, imagine a water pipe bursts in your bathroom, ruining everything in that room and in the bedroom next to it. Typically, if you have homeowner’s or renter’s insurance, the insurance company will pay to replace some or all of the damaged property, once you pay your deductible. It is pertinent to note that insurance policies will only pay for things that are described in the policy. So it is important to read a policy carefully before you buy it in order to know exactly what is covered.
How does an insurance policy work?
Insurance policies are often in place for a specific period. This can be referred to as the policy term. At the end of that term, you need to renew the policy or buy a new one. With some types of insurance, one chooses a beneficiary, the person you want to receive the policy’s benefits or payments. When one buys an insurance policy, part of the responsibility includes paying a fee called a premium. Some premiums are paid monthly, like, health insurance. Others may be paid once or twice a year, like auto or homeowner’s insurance.
The cost of one’s premium generally depends on how much of a risk you are to the insurance company. In addition to the premiums, most insurance policies include a deductible. That’s the amount you have to pay first, before the insurance company pays their share. For example, if you have a N500 deductible on your homeowner’s policy and a storm causes N3,000 in damage, you will pay N500 and your insurance company will pay N2,500. With some policies, one can choose his/her deductible. Usually, a higher deductible means a lower insurance premium.
Ways to lower your auto insurance costs
One of the best ways to keep auto insurance costs down is to have a good driving record. Here are some other things one can do to lower his/her insurance costs, according to the Global Insurance Forum.
Prices vary from company to company; therefore, it pays to shop around. Get at least three price quotes by calling companies directly or accessing information on the Internet. Insurance bodies and regulatory agencies may also provide comparisons of prices charged by major insurers. You buy insurance to protect you financially and provide peace of mind. It is important to pick a company that is financially stable. Check the financial health of insurance companies with rating companies such as Standard & Poor and consult consumer magazines. Get quotes from different types of insurance companies. Some sell through their own agents. These agencies have the same name as the insurance company. Some sell through independent agents who offer policies from several insurance companies. Others do not use agents. They sell directly to consumers over the phone or via the Internet.
Do not shop by price alone. Ask friends and relatives for their recommendations. Contact necessary insurance bodies to find out if they provide information on consumer complaints by company. Pick an agent or company representative that takes the time to answer your questions.
Compare insurance costs before purchasing a car
Prior to buying a new or used car, it is advisable to check into insurance costs. Car insurance premiums are based in part on the car’s price, the cost to repair it, its overall safety record, and the likelihood of theft. Many insurers offer discounts for features that reduce the risk of injuries or theft. To help one decide what car to purchase, he/she can get information from the Insurance Institute for Highway Safety.
Ask for higher deductibles
Deductibles are what you pay before your insurance policy kicks in. By requesting higher deductibles, you can lower your costs substantially. For example, increasing your deductible from N200 to N500 could reduce your collision and comprehensive coverage cost by 15 to 30 percent. Going to a N1,000 deductible can save you 40 percent or more. Before choosing a higher deductible, be sure you have enough money set aside to pay it if you have a claim.
Reduce coverage on older cars
Consider dropping collision and/or comprehensive coverage on older cars. If your car is worth less than 10 times the premium, purchasing the coverage may not be cost-effective. Auto dealers and banks can tell you the worth of cars. Or you can look it up online. Review your coverage at renewal time to make sure your insurance needs haven’t changed.
Buy your homeowners and auto coverage from the same insurer
Many insurers will give you a break if you buy two or more types of insurance. You may also get a reduction if you have more than one vehicle insured with the same company. Some insurers reduce the rates for long-time customers. But it still makes sense to shop around! You may save money buying from different insurance companies, compared with a multi-policy discount.
Maintain a good credit record
Establishing a solid credit history can cut your insurance costs. Most insurers use credit information to price auto insurance policies. Research shows that people who effectively manage their credit have fewer claims. To protect your credit standing, pay your bills on time, don’t obtain more credit than you need, and keep your credit balances as low as possible. Check your credit record on a regular basis and have any errors corrected promptly so that your record remains accurate.
Take advantage of low mileage discounts
Some companies offer discounts to motorists who drive a lower-than-average number of miles per year. Low mileage discounts can also apply to drivers who car pool to work.
Ask about group insurance
Some companies offer reductions to drivers who get insurance through a group plan from their employers, through professional, business and alumni groups or from other associations. Ask your employer and inquire with groups or clubs you are a member of to see if this is possible.
Seek out other discounts
Companies offer discounts to policyholders who have not had any accident or moving violations for a number of years. You may also get a discount if you take a defensive driving course. If there is a young driver on the policy who is a good student, has taken a driver’s education course or is away at college without a car, you may also qualify for a lower rate.
Saving money on your car insurance
With the cost of living soaring and bills continuing to rise, we’re all searching for ways to save money where we can, and we could do with a discount or two right now; a financial breather, a buffer, the smallest sliver of a break. They may seem few and far between these days but drivers keen to cut the cost of their car insurance can still find great deals by shopping around with Comparethemarket.
In this era of mass exodus of many Nigerians seeking the golden fleeces and greener pastures in foreign countries, Kate Hughes of comparethemarket.com offers useful tips on how to drive successfully abroad.
Hugessays, “If you’re planning on driving abroad, there are a few details you ought to know before you set off.
Do I need car insurance for driving abroad?
Whether you’re taking your own car abroad or hiring a car when you get there, you must legally have at least third-party insurance to drive abroad.
Your UK car insurance will automatically cover you on a third-party basis when driving your own car abroad. Check your policy or ask your insurance provider to find out exactly what’s covered.
How do I know if my car insurance covers me when driving abroad?
The easiest way to see if your car insurance covers you for driving abroad is to check your policy documents or contact your insurance provider directly. All UK-based car insurance policies offer third-party cover to drive in the EU, including Ireland. However, the same might not apply when driving in other countries. Even if your policy does mention overseas car insurance for driving abroad, it’s important to familiarise yourself with the details, including: The level of cover – many policies will only offer the most basic form of cover when abroad. Don’t assume that because you have a fully comprehensive policy in the UK, you’ll automatically have the same once you cross the Channel. It doesn’t really work like that.
The period of cover – you might also find policies have a limit on the number of days they’ll cover you while driving abroad. This could be a continuous limit, for example, 14 days in a row or it could be a total yearly allowance. It’s worth discussing the specifics of your journey with your insurance provider, to tailor cover to your travel dates.
What about insurance if I’m hiring a car?
If you’re hiring a car abroad, insurance is usually included in the hire costs. But it’s worth checking the level of cover included and how much the excess is (the amount you’ll have to pay towards a claim you make on your insurance) should you need to make a claim. The hire company may also ask to see your driving licence information. You can share this by getting a DVLA check code and you can do this up to 21 days before you travel.
For a car you’ve hired or leased in the UK before travelling overseas, you’ll need a VE103 document, which you might need to pay for. The VE103 vehicle-on-hire certificate can provide proof that you’re allowed to drive a hired or leased car abroad. Contact your hire or lease company for more information before you travel.
Documents needed to drive abroad
Essential documents you’ll need to drive your car abroad are: “A valid full UK driving licence and national insurance number, Proof of valid UK car insurance, Proof of ID (passport), Your vehicle’s V5C registration certificate (log book), Travel insurance documents, and European Breakdown Cover policy number and documents. Additional documents if you’re taking a boat or going in a vehicle other than a car or motorbike.”
In some countries, you might also need: An International Driving Permit, A Green Card (if driving outside the European Economic Area), UK car sticker, clean air emission permits (in some European cities).
What do I need to take in my vehicle when driving abroad?
It depends on the country you’re visiting. If you’re driving in the EU, you’ll need to be equipped with: Reflective jackets – every person in the car needs one and they need to be kept in the car; Warning triangle – compulsory in most countries; Headlamp deflector stickers; Clean air permit stickers – for example, in France you’ll need a Crit’air sticker; UK car sticker; First aid kit (compulsory in Austria, Germany, and France); Snow chains – carrying snow chains are compulsory during the winter months in most European countries, even if you already have winter tyres fitted.
It’s also recommended that you take the following items with you when driving abroad: Fire extinguisher, Replacement bulbs, Torch, Spare fuel can, Water for topping up, and Global Health Insurance Card (GHIC) – if travelling in the EU.
Those travelling abroad are advised to obtain necessary information from appropriate quarters concerning the country they intend to visit regarding the insurance policy they must have. Failure to take the needed precautions before jetting out of the country may lead to a head-on collision with the law enforcement agencies of the country of visit.
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.