In theory, there are four types of motor insurances (Acts Only, Motor Third party, Third Party, Fire and Theft and Comprehensive), but in practice, only three are operative. Acts Only has been consigned to the dustbin of history for a long while now. The most common of the three operative motor insurances is Motor (Third Party) Insurance. This is understandable because it is the cheapest. The premium is N5,000 for private vehicles and N7,500 for commercial vehicles. The premium for lorries and articulated vehicles ranges from N10,000 to N25,000 (depending on tonnage).
In addition, Motor (Third Party) Insurance is compulsory and statutory. The Motor Vehicles (Third Party) Insurance Act of 1945, which took effect from 1st April 1950, makes it an offence for anybody to use a motor vehicle on the road without having in place the minimum Motor (Third Party) Insurance to cover the motorist against liabilities arising from third party bodily injuries or death. The Insurance Act of 2003 extended the cover to take care of liabilities arising from damage to third party property to the tune of N1,000,000.
Comprehensive Motor Insurance, as we have discussed in the past, covers third party liabilities for bodily injuries, death and property damage, own damage, theft, loss of personal effect and offers limited amount for medical expenses.
In between Motor (Third Party) Insurance and Comprehensive Motor Insurance is the Third Party, Fire and Theft Motor Insurance (TPFT) Cover. This policy covers the insured for third party liabilities for bodily injuries, death and property damage. Like the other two types of motor insurance covers, TPFT offers unlimited cover for third party bodily injuries and death. In practice, however, there are parameters for determining the compensation due the third parties. For instance, what were their annual earnings before the injury or death? In the case of death of third parties, the age of the deceased will partly determine the compensation due the next of kin.
The compensation for third party property damage is also N1 million, but this limit can be increased with the payment of additional premium. In addition, TPFT covers the theft of the vehicle in fortuitous circumstances. Fortuitous circumstances mean the theft was unforeseen.
If the insured leaves the car keys in the vehicle and the vehicle is stolen, it is not covered. Also if the vehicle is stolen by a domestic staff or the driver, it is not covered. You will recall that we explained in the past that theft of vehicle by a domestic staff is not covered. Such a risk is more appropriately covered by Fidelity Guarantee Insurance.
Fidelity Guarantee Insurance is designed to provide cover for the insured against any financial loss sustained, including theft of his vehicle, as a result of fraud, dishonest acts, theft and forgery, among others, committed by the employees in the course of their occupation or duties. Please note that Fidelity Guarantee Insurance does not guarantee the fidelity or honesty of the employees; it only states that if the policy holder loses money or assets as result of the infidelity of his employees as specified in the policy, he will be indemnified in line with the provisions of the policy.
Finally, TPFT also covers loss of, or damage to the vehicle, by fire, external explosion, self-ignition and lightning. The policy, however, does not cover damage caused by explosion of any boiler forming part of, attached to, or on the vehicle. Obviously the policy also does not cover arson, because it is not only a deliberate act, it is a criminal act.
TPFT is an upgrade of Motor (Third Party) Insurance. It covers everything third party insurance covers, but only covers parts of what Comprehensive Motor Insurance covers. For instance, it does not cover accidental collision or overturning as a result of mechanical breakdown. Since TPFT does not cover own damage, the insured will also not be entitled to “reasonable medical expenses incurred in connection with any bodily injury by violent accidental, external and visible means sustained by the insured or his driver or any occupant of the motor vehicle as the direct and immediate result of an accident to the motor vehicle.”
TPFT does not have provision for excess buyback like Comprehensive Motor Insurance has. Excess, as we explained some time ago, is the portion of each and every claim an insured bears in the event of a loss. It is an insurance provision meant to encourage policy holders to treat their assets diligently as it they were not insured. The excess clause is inserted in all insurance policies, but in Comprehensive Motor Insurance, the insured can buy back the excess usually at one per cent of the sum insured. When an insured buys back the excess, the implication is that in the event of a loss, his claim is paid in full without deductions for excess. TPFT does not enjoy this provision.
The premium for TPFT is usually about 60 per cent of the premium for Comprehensive Motor Insurance subject to negotiation. The patronage of TPFT is very low and a few reasons might be responsible. One, many people are not aware of the existence of TPFT. This lack of awareness affects its patronage. Two, many people who can afford the premium of TPFT can also afford the premium for Comprehensive Motor Insurance and would rather go for the more comprehensive cover.
Three, in Nigeria, as one Federal Road Safety Commission official explained some time ago, assume you are driving five vehicles when on the road: yours, the ones in front of you and behind you and the vehicles on your right and left. Our driving is disorganized and lawless, which increase the possibility of accident. This is a major drawback for TPFT.
Also, TPFT is not suitable for luxury vehicles. The possibility of fire and theft is low in luxury vehicles, while the probability of accident is high sometimes due to no fault of the insured. Also parts of luxury vehicles are very expensive. In the event of an accidental collision, the set of new headlights or rear lights of some luxury vehicles go for as much as N1.5m. Even if another party is at fault, the limit for third party property damage is N1m. That is all they can get from the insurer of the third party. Unless the third party is somebody of means and can pay the balance of N500,000 for the lights from his pocket, the insured is left with a liability of N500,000. This makes TPFT unsuitable for luxury vehicles.
However, TPFT remains an improvement on Motor (Third Party) Insurance and is recommended for those who want more protection but cannot afford Comprehensive Motor Insurance.