When you take out car insurance there are many terms that you need to understand – named driver and regular driver are two of them. A named driver is the person who is named in the policy as a designated driver of the insured car. It is very important for you to establish your insurance company’s rulings about named drivers. Usually other people who drive your car will also be covered under your car insurance policy but only if they were driving your car with your consent.
Many insurance companies also use the term regular driver. The regular driver is the person who drives the car more often than any other party. If someone else drives your car on a regular basis you must include this person by name as a regular driver. Other people who drive your car on the odd occasion will be covered as well.
When an insurance company calculates the premium payable they will look at your overall risk profile. It stands to reason that should someone else drive your car on a regular basis this person’s insurance profile needs to be taken into account as well. Ultimately it is in your best interest not to allow all and sundry to drive your car. Make sure you are totally up to date with your own car insurance policy conditions.
Negligence or neglect can be described as the failure to carry out the degree (amount) of care for others or their possessions as can be legally required. The law refers to carrying out a “reasonable” amount of care – as any “reasonable” person would have done under similar circumstances. Every person has this legal duty of care for others. The care refers to protecting others against unreasonable risk or harm. A duty of reasonable care is a general duty imposed by law and can give rise to civil action claims against other parties.
Negligence forms the basis for liability insurance. Short-term insurance, including car insurance, provides cover against the loss of the insured person’s personal assets and also insures against possible liability. If you take out comprehensive car insurance you receive cover against natural disasters such as fires, theft and your own negligence. Where the term gross negligence is used it refers to the strongest form of negligence that can take place.
You can personally be held liable to compensate another party who has suffered a loss due to your negligence and personal liability insurance protects you against these claims. Car insurance policies include an amount of personal liability cover but it is limited to the amount as indicated in your policy document. It is your own responsibility to take out additional liability insurance if you are not sufficiently covered. Liability claims can cripple a person financially for life.
The term new business is used in car insurance to differentiate policies written in response to new car insurance applications to that of renewal business. Car insurance companies use this differentiation to measure, amongst other things, the profitability of new business.
New business can come from a number of sources such as direct applications for car insurance made to the company, telephonic applications, internet applications and also through an insurance agent of the company or an insurance broker. Any new business that is generated through an agent or broker will cost the insurance company commission while direct business through the internet is more profitable to the insurer. Renewal business is when a car insurance policy is renewed, usually when the policy was in place for a year and thereafter annually.
Within the first few years of a new business car insurance policy claims could be much higher than the premiums earned on the policies. The term used by insurance companies when this happen is new business strain. The longer a car insurance policy stays in place without any claims made on it, the more profitable it will be for the insurance company who can then offer these clients cash-back bonuses or no-claim bonuses.
New-for-old insurance cover means that an insured item which is lost or destroyed will be replaced by a brand new one. There is therefore no deduction made for depreciation (wear and tear) of the item. It is sometimes also referred to as “replacement as new.”
This basis of insurance is mostly used for Household Content insurance where one needs to insure for the replacement value of items and not the current market value. Insurance is therefore calculated on a higher amount than what your possessions are actually worth at the present moment.
In car insurance most insurers will only insure your car valued at current market value and not for replacement or new-for-old value. The reason for this is that cars devalue very fast, as soon as you drive your brand new car off the dealer’s floor, it has already lost value. Insuring at replacement value when dealing with car insurance will be extremely expensive.
Specialist car insurance such as executive, classic or exotic cars normally pay out at retail rate, which is higher than market rate. The retail value is the value at which a car dealer will sell the car in a show room plus a fair mark up, currently around 15%. This percentage can change depending on supply and demand.
A no-claim bonus is a reward system used by many Insurance Companies on car insurance policies as an incentive and given to insured parties if no claim was made during a certain period of time. The time period during which no claims must be made is normally between three to five years.
No-claim bonuses can be paid out as a cash-back bonus – usually one year’s premiums. The incentive can also be in the form of reduced premiums after the initial claim free period was reached. Some companies will pay out the no-claim bonus and also decrease your rate after the applicable period has expired.
When you move from one insurance company to another the new company will take your previous no-claim status into account when quoting a premium to you. The new company will require some form of proof that you made no claims, such as your renewal notice. The claim-free system or groups is based on groups according to the number of claim-free years.
No-claim bonuses are not fault-related which means that even if a claim was not due to any fault on your side, you will still loose your no-claim bonus. You can protect your no-claim discount if you have a number of no-claim years by paying a small additional premium. Small claims such as windows/windscreen will not affect your no-claim bonus, but always check the small-print on your policy. It will be in your best interest to carry small claims yourself rather than loose your no-claim bonus.