IF2 - Module 1 Flashcards
What are the four levels of motor insurance avaliable in the UK?
- Road Traffic Act only (RTA only)
- Third Party only (TPO)
- Third party, fire and theft (TPFT)
- Comprehensive
What does Road Traffic Act (RTA) only motor insurance cover?
As the name implies, RTA only is the minimum level of cover required to comply with the Road Traffic Act 1988.
What is the minimum amount of third party property cover required under Road Traffic Act only cover?
The minimum level of cover required must be in line with current EU motor directives which is automatically adjusted to inflation every 5 years.
The UK Government passed legislation to increase the limit under the RTA to £1.2m from the 31 December 2016.
What indemnity does RTA only cover provide?
RTA only cover provides:
- an unlimited amount for bodily injury or death caused to third parties, including passengers;
- £1.2m for loss of or damage to property belonging to third parties;
- claimants’ costs and expenses and charges for any hospital or emergency medical treatment.
All policies must also meet the requirements of the Third EU Motor Insurance Directive.
Why have very few RTA only policies been issued since the 1988 Act?
Very few RTA only policies have been issued since the introduction of compulsory third party property damage under the 1988 Act, since this means that the difference in cover between RTA only and third party is only very marginal.
The additional requirements of the Fifth EU Motor Insurance Directive brought the two levels of cover even nearer, meaning that for all practical purposes, the lowest level of cover offered by insurers is third party only.
What does third party only cover provide?
In addition to providing RTA cover, third party only (TPO) cover usually provides the following:
- cover for vehicles while not on a road or in a public place within the UK, the Isle of Man or the Channel Islands (although some insurers automatically extend the cover to the EU for a limited period);
- a higher limit of third party property damage cover (£20m compared to £1.2m of RTA cover);
- cover for anyone driving or using the vehicle with the insured’s permission and permitted to drive by the policy (may be restricted to named persons);
- indemnity to passengers, employers or business partners of the insured, should they be held responsible for an accident;
- legal costs for defending a claim;
- limited legal representation costs following a prosecution for a motoring offence which may give rise to a claim; and
- cover for the insured while driving another car that does not belong to them (not all insurers provide this cover and those that do exclude the use of this extension as a means of securing the release of vehicles seized by the police for having no insurance).
- Damage to the insured’s own vehicle is specifically excluded, as is any liability covered by any other insurance policy
What does Third party, fire and theft (TPFT) cover provide:
In addition to third party only cover, third party, fire and theft (TPFT) cover includes the cost of repairs or compensation to the insured if their vehicle is:
- damaged by fire, lightning or explosion;
- damaged during attempted theft, or whilst stolen; or
- stolen and not recovered.
However, there is no cover for malicious damage, although damage caused by ‘joyriders’ is covered as theft damage.
third party, fire and theft cover specifically excludes ‘loss of use’; i.e. any payment the insured may have to make, for example to use taxis, while their car is being repaired or recovered.
What does Comprehensive motor insurance cover?
In addition to the cover granted by a third party, fire and theft policy, a comprehensive policy covers other accidental and malicious damage to the insured’s car.
The cover granted is on the same basis as an ‘all risks’ policy, in that all loss or damage, however it occurs, is covered subject to specific exclusions. These are:
- loss or damage to accessories and spare parts, unless on the vehicle or in the insured’s garage;
- wear and tear and depreciation;
- loss of use (although some insurers now grant a limited form of loss of use cover);
- mechanical and electrical failure or breakdown (although, if an unexpected mechanical failure causes a collision – say, the brakes fail - the resulting damage to the vehicle is covered); and
- damage to tyres caused by road punctures or bursts
A comprehensive private motor policy usually provides cover for ‘driving other cars’ in the same way as a third party policy.
However, it is important to note that only third party cover is granted for this extension, even under a comprehensive policy. There is no cover for damage to the vehicle being driven.
What are the benefits that are often included with comprehensive motor insurance cover?
Personal accident cover
- This provides certain benefits to the insured or spouse if they are seriously injured as the result of an accident to any car they are driving or travelling in. Benefits are usually capital sums and apply to specific injuries, such as the loss of a limb or sight, with some insurers also providing a benefit for temporary total disablement.
Medical expenses
- Although emergency treatment cover is compulsory under the RTA, the comprehensive policy includes additional medical expenses cover for the insured or a passenger, subject to a limit of, say, £250 to £500.
Personal belongings and clothing
- A modest amount of cover is provided, usually around £250 although £1,000 is not uncommon, to cover personal effects and clothing in the car that are lost or damaged by accident, fire or theft.
What is a No claims discount (NCD)?
All insurers offer the incentive of a no claims discount (NCD) as standard in their policy wordings.
The terms ‘no claims discount’ and ‘no claims bonus’ are interchangeable.
Rates vary considerably between insurers, but it would not be unusual to find discounts of 12% for one year free of claims, up 50% + for five years or more free of claims.
Generally, insurers will reduce the entitlement to an NCD by dropping back two years if a claim is made. For a small additional cost, a full no claim discount may be ‘protected’, so that a modest (defined) number of claims will not affect the level of discount.
Certain insurers offer a ‘guaranteed’ discount: once, say, five years claim-free driving has been achieved, the bonus can be protected ‘for life’ at an extra premium. It must be noted, however, that while the bonus is protected in this way, the insurer does not provide any guarantee regarding the levels of premium from which the deduction is made.
What is an uninsured driver promise?
A number of insurers now offer cover under their comprehensive policies for where the insured’s vehicle is involved in an accident with a third party’s vehicle which does not have motor insurance.
Such accidents can often involve a lengthy claim process and considerable expense.
This extension will usually protect the insured’s no claim discount and from the application of their policy excess – provided they can provide full details of the third party vehicle involved. It will not apply to ‘hit and run’ accidents where the third party cannot be traced and the required details are not available.
What are the optional extensions you may see with standard motor policy cover?
Breakage of glass
- Comes as standard w/ comprehensive
Can be added to non-comp for additional premium
Claims don’t affect NCD
Personal belongings and clothing
- Included as standard in a comp policy for a modest sum
Young additional drivers
- Young drivers (typically under 25) can be included subject to additional premium
Loss of use
- Although loss of use is a specific exclusion to the comprehensive policy, some insurers are prepared to offer such cover, limited to an amount per day and subject to an additional
premium.
Personal accident benefits
- May offer increased capital benefits or the addition of weekly benefits for the insured or their spouse.
- May also include rehabilitation benefits i.e. specialist medical care.
Foreign use
- All policies issued in the UK (and any other country subject to the EU Directives) must extend to provide either the minimum cover required by the country being visited or the
minimum cover required by the country where the vehicle is normally kept, whichever is the greater.
Elections
- Motor vehicles are sometimes used in connection with elections, which is typically not regarded as normal ‘SDP’ use. Insurers don’t usually charge an additional premium for such an extension, except in the case of parliamentary elections.
Racing, competitions, rallies and trials
- Events, such as road safety rallies, may be covered at no additional charge. However, those involving racing are covered by only a few specialist insurers, subject to an additional premium.
Caravans and trailers
- Insurers generally provide third party cover for caravans or trailers while they are attached to the insured vehicle.
Breakdown cover
- Some insurers offer the facility in their comprehensive policies to call a control centre for assistance. In addition, some insurers provide cover for the cost of the call-out charge, an hour’s roadside repair labour and towing the car to a garage. This extension is subject to an additional premium.
Joint policies
Insurers are occasionally asked to issue policies in joint names, e.g. a husband and wife.
Such an extension may or may not be subject to an additional premium, depending on the
cover required and whether each of the joint insureds wishes to have the benefit of the ‘driving other cars’ cover. This benefit would usually either be deleted or stated to apply to only one of the joint insured. Cover provides for the situation where one of the joint insureds
may have a claim against the other. Effectively the policy operates as if each had their own policy and treats the other as a third party. This could happen where one of the joint insureds
is at fault and causes an accident injuring the other. A claim can be made against the negligent party.
Multi car policies
- A number of insurers offer a multi car policy
- The cars must be registered at the same address.
- The policy covers will be Comp, TPO or TPFT as appropriate.
- There is usually a premium saving and most insurers will guarantee separate no claim discounts for each vehicle.
Misfuelling
- Any loss or damage caused by accidentally filling the insured vehicle with the incorrect type of fuel.
What things are usually excluded from a motor insurance policy?
In addition to the specific exclusions already discussed, there are a number of general exclusions applicable to all sections of the policy, including:
- driving by unlicensed drivers;
- use of the insured vehicle outside of that permitted by the policy;
- contractual liability;
- war risks;
- radioactive contamination and explosive nuclear assembly;
- riot and civil commotion in Northern Ireland, for own damage cover;
- sonic bangs
- pollution and contamination unless arising from a single identifiable event.
How would someone insure a motorcycle?
In insurance, the term ‘motorcycle’ includes any kind of cycle propelled mechanically, including mopeds.
Motorcycles are insured through ‘specified motorcycle insurance’ where the rider is insured for a particular motorcycle. Like motor vehicles, motorcycles are subject to the Road Traffic Act 1988.
What does standard policy cover look like for comprehensive specified motorcycle insurance?
The format of a comprehensive motorcycle policy is much the same as a private motor policy. The main differences are:
- the accidental damage section follows that for private vehicles, except that it does not cover theft of accessories or spare parts unless the motorcycle itself is stolen at the same time;
- the liability section generally indemnifies the insured (or their personal representatives in
the event of the insured’s death), others permitted to drive the motorcycle and users of the motorcycle for social domestic and pleasure purposes; and - there are no personal accident benefits and no cover for medical expenses (beyond emergency treatment fees) or personal effects.
