Auto insurance penetration still low in Nigeria
Last week, the violent offshoot of the popular #EndSARS protest led to the vandalisation of hundreds of properties across Nigeria. Over 100 vehicles were burnt in the process.
It is an event such as this that makes auto insurance imperative. In the unfortunate incident that your vehicle was part of those razed in that incident, you have suffered a major loss, which you have the chance of immediate recovery if only your car had any insurance cover.
Generally, insurance penetration in Nigeria is still low, contributing only 0.7% to the GDP, according to a recent PwC report. So, a lot of car owners do not know about auto insurance.
But if the incident of the past week has inspired you to get an auto insurance, here are 4 things you need to keep in mind before taking a comprehensive cover for your car. These tips are based on our chat with Uchenna Njoku, an insurance executive with AIICO Insurance.
1. YOUR COVER IS LIMITED TO YOUR PREMIUM
This means that the insurance company will not pay damage exceeding your comprehensive cover. Let’s take the violence in Lagos of the past week, for instance. Assuming that a police vehicle, which was insured, and parked in your neighbourhood was targeted in the arson attack. But unfortunately, the fire spread to other vehicles parked nearby.
Also, Read this before buying any property in Lagos
Let’s assume that the police vehicle was insured at 4 per cent of its value. Let’s say that 4 per cent amounts to 7 million naira. Now, the damage it has caused is estimated at over 50 million naira. The insurer will not pay the 50 million naira. What it will pay is a certain percentage of the premium not exceeding the 7 million naira.
2. YOUR DISCOUN DETERMINES YOUR COVER
This seems pretty obvious. According to Njoku, it is generally possible to get between 2 – 4 per cent insurance cover. This means you can ask to insure your vehicle for anything between 2 to 4 per cent of the total value of the vehicle.
But assuming you got 2 per cent, and your vehicle gets stolen, you will only get a fraction of the total replacement value, because the law requires you to bear a certain amount of the risks.
This is called an excess buyback. so, if you expect to get the full claim if anything happens, you need to buy that excess back by paying at least 3.5 per cent.
So, don’t try to be smart by negotiating for anything below. It doesn’t pay you in the long run.
3. YOUR COVER DIMINISHES AS YOUR CAR DEPRECIATES
Let’s say you purchased you car for 3 million naira in December 2019 and insured it at 3.5 per cent. by December 2020 when it expires, and you want to renew, your car won’t be valued at 3 million naira anymore.
You see, your car has depreciated and that will be taken into account. So, while you will still pay a 3.5 per cent discount, the value may have dropped to say, 2.5 million naira.
This means that your cover diminishes as your car depreciates.
4. YOUR COVER DOESN’T INCLUDE THEFT BY A MEMBER OF YOUR HOUSEHOLD
This is an interesting auto insurance provision. So, the insurance company can generally replace your car when it is stolen. But not when it is stolen by a member of your family.
This is just as the insurer is not liable if a minor or someone without a driver’s licence damages your car
while driving it.
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