By Ade Fashola
Dear Reader, I have decided to repost the episode on third party insurance since everyone is claiming they missed it. Enjoy!
Let me tell you my mind”, Femi yelled. “I don’t know the reason why I should be giving my money to an insurance company. If nothing happens to me or any of my properties, they won’t give me anything, meaning my money is gone”.
Femi continued, “For over four years the bank mandated me to have an insurance because of the loan I took to buy my car. Immediately I finished paying off the car loan, I changed to police pass me insurance just to avoid police trouble”.
What is police pass insurance? I asked.
“Third party”, he said and continued “The only time I was involved in an accident, I spent almost N300,000 to repair the woman’s car”. I waited patiently for him to make his points then asked, “Femi, how much did you pay for your third party insurance?” He said he paid N5000.
“And why did you pay Five thousand Naira for no purpose?” I probed further.
“I told you it was to avoid police trouble”he retorted.
“So you paid in advance to avoid police trouble”, I joked.
“That was it my friend”, he replied with a shrug .
“Did you report the accident to your insurance company? I asked.
“No”, he said, “because I have third party”
“Femi, do you know what third party insurance is”? I asked.
He stammered before responding “please tell me, you are the professional.”
I requested for his attention for 10 minutes so that he could understand why the N5,000 he paid for the third party liability was his best spent five thousand Naira. What you buy in third party insurance is what I call “peace or rest of mind”. Third party insurance will cover the cost of any expense to anyone as a result of your vehicle causing damage.
Let us delve deeper,just as Femi adjusted himself and listened as I started educating him about the world of insurance.
“Firstly, the N300,000 you spent to repair the woman’s car was a waste because your third party covered that accident. “Third party insurance” is generally called “Auto Liability Insurance”. It provides payment for covered damages up to the policy limit, injury to or the death of others (if you are legally liable), or damage to property in a covered auto accident. It protects persons authorized to use your vehicle with your permission- this can be anyone inclusive of any member of your household. Let me be more detailed in explaining the coverage – injury or death covers payment to third party bodily injury, first aid expenses, and other damaged vehicles by virtue of direct liability. It pays for the cost to other people’s property other than vehicles. Most importantly, if you are sued and get a guilty verdict as a result of auto accident, it will cover legal cost.
Femi was amazed and asked “all these in N5,000?” Yes, all that in N5,000.
“Please come down to my level, use simple language or example”, Femi demanded. “Can I use Daniel story you told me?” I enquired. He gave the go ahead.
Let me summarize the Daniel’s situation. Daniel was our Labor prefect when we were in school. He started Farming before we graduated and was prosperous. Daniel had a car, was popular in town and probably may not have police stopping him thus he refused to renew his car insurance in spite of all pressure from the agent, for a reason best known to him. One day, he got involved in an accident. The other party was a taxi car. A passenger died in the other vehicle while the driver was seriously injured. Two ambulances were called to evacuate the victims to the hospital. Daniel was sued by the family of the deceased and he was found guilty. Daniel was lucky he wasn’t found criminally guilty but was confronted with over N2million in civil liability. Within a space of two weeks, all his fortune became ruined. To Femi, Daniel was a victim of Witches from the hometown.
A simple third party coverage would have helped. Third party liability would have covered ambulance fees, hospital expenses, physician services, funeral expenses and compensation for the bodily injury and death resulting from the accident. Although it depends on the policy limit but he may not have been needed to pay any out of pocket expenses or may have paid a little if any, therefore his business may have survived with no need to run away because of debt the accident caused. “You see why the government made the third party insurance a must for all vehicle owners?” I asked Femi. “Tell me again your thoughts, why did Daniel refused to renew the insurance? Do you think he can’t afford N5,000? Why would he put himself in this kind of situation? May be the witches were responsible for the accident but did the witches know about insurance?”
“There is a British adage that called penny wise, pounds foolish. Losing your entire livelihood and or becoming a fugitive because you want to save N5,000 is stupidity but in your own case, it was ignorance. You give the witches too much credit. A full tank of any car at any particular time will cost more than a third party of N5,000.”
At this moment, Femi was bewildered. He looked at me and said,“how are you so sure that insurance will pay all these money on N5000? Can I still claim my money? He asked. My answer was “Do you know Insurance has a regulatory body called NAICOM? If you know of anyone that insurance company refused to pay his or her legitimate claim, please send my contact to that person”.
I will discuss legitimate claim in my future writing and how to identify a distressed insurer.
Femi looked at me and asked “Can I still make a claim” I will discuss in my future writing as well as the main difference between third party and comprehensive insurance, I replied.
Enjoy the rest of the week.
I will respond to all questions and enquiries received in episode 2.
Ade Fashola is the CEO of Universal Risk
