Enhanced Motor Third Party insurance

In my last article I discussed the three main types of motor insurance policies in the Insurance Nigerian market: They are the motor (third party) insurance, which is compulsory, third party fire and theft (TPFT) and comprehensive motor insurance. I explained further that the premium for third party insurance is N15,000 for private vehicles, N20,000 for buses, N5,000 for tricycles, N2,000 for motorcycles, and N100,000 for trucks.

The limitation of third party insurance cover is that it offers the policyholder no personal relief. It only provides the policyholder relief for liabilities to third parties for bodily injuries, death and property damage. The limit for property damage is N3 million for private vehicles, N5 million for own goods vehicles, N2 million for tricycles, N1 million for motorcycles and N5 million for trucks.

The challenge some policyholders have is that they do not have the resources to do a comprehensive motor policy or TPFT. The premium for comprehensive is five percent of the insured value of the vehicle and two-third of the insured value for TPFT (subject to negotiations). But some policyholders want to have their cake and eat it; that is, they want some personal relief (claim for own damage) in addition to cover for third party liabilities. This is our focus in this article. 

To satisfy such policyholders, some insurance companies have come up with a third party insurance product that offers limited relief with payment of a little extra premium. Some insurance companies call theirs enhanced third party insurance, third party insurance plus, etc. They charge an extra premium in addition to the statutory N15,000 for third party private vehicles premiums and premiums of other types of vehicles, depending on what you or your insurance broker negotiates or the extent of cover you want for your own damage. 

The implication is that if the policyholder is involved in an accident, beyond covering his liabilities to third party, if he is at fault (which is what third party insurance covers), the insurance company will also pay him some compensation for own damage (damage to his vehicle), subject to the policy limit of the policy. The policyholder should, however, be aware of the risk he is carrying. In the event of an extensive damage to his vehicle, he will be his own insurer for any amount above the policy limit for own damage minus excess (excess is the portion of each and every claim, expressed in figures or percentage of the claim a policyholder bears. The clause is put in every insurance policy to encourage policy holders to take good care of the subject matter of insurance (vehicle in this case) as if it was not insured. Only in comprehensive motor insurance can a policyholder buy back the excess at a percentage of the sum insured). The implication is that in the event of an accident, the insurance will pay the full adjusted claim to the policyholder without deducting any amount for excess. These days, excess buyback is automatically granted to policyholders with comprehensive insurance by most insurance companies.

Enhanced third party is very good for people with vehicles with value under N10 million. For such vehicles, if they are involved in an accident for which they are liable, between N200,000 to N300,000 can fix their vehicles, provided the damage to the vehicle is not severe. If it is extensive, millions might be required for the repairs. The policyholder has to bear the additional cost for the repairs. This insurance is also no substitute for TPFP or comprehensive because if the vehicle is stolen, there is zero remedy for the policyholder. 

This enhanced third party insurance is not suitable for all vehicle owners. For instance, if the value of your car is N150 million, it is useless and a waste of time. In the event of an accident, one headlight of a luxury car can cost as much as N5 million to replace. So of what use will N300,000 minus excess be to such a policyholder, who might spend N5 million or more on repairs at the end of the day. So for such a policyholder, he should insure the vehicle comprehensively, or take the statutory Motor (Third Party) and be his own insurer. In practice, some rich people do comprehensive insurance, but some stupendously rich people do only third party insurance to comply with the law: 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. Also, section 68 of the Insurance Act and Section 3 of the Motor Vehicle (Third Party) Insurance Act requires that no person shall use, or cause or permit any other person to use, a motor vehicle unless such a motor vehicle is insured against damage to the property of third parties. This is in addition to the Insurance Act of 1945. 

When you tell some very rich people to do comprehensive insurance, they tell you that if one vehicle is stolen or involved in an accident, they have other vehicles at their disposal. Moreover, they have the money to replace it. But can you say so, of yourself? If you can’t, please take a comprehensive motor policy if you can afford it.

Not all insurance companies have an enhanced third party product as I said earlier. You can contact a registered insurance broker to guide you on insurance companies that offer it. There are also options for flexible payment in case you want to do comprehensive insurance. Contact a Registered Insurance Broker (RIB) for details. The list of RIBs is on these websites: https//naicom.gov.ng ; and https://ncrib.net.

NB: The police started the enforcement of the minimum third party insurance on Nigerian roads nationwide since February 1 this year. Please ensure that your insurance is genuine. Visit: https//askniid.org

om.gov.ngnaicom.gov.

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