The term valuation refers to the calculation or determination of the value of an asset. In car insurance a valuation of the asset, being the insured car, is very important as the valuation amount plays an vital role in the calculation of the premium. When you insure valuable items such as jewellery or paintings you will obtain a valuation certificate from a qualified valuator who is a specialist in his area of expertise.
In car insurance valuation operates on a different basis. When you buy a new car the valuation will be equal to the book value of the car. The value of cars decreases at a rapid rate, some faster than others. There are also many factors that will influence the value of a car, things such as the kilometers on the clock, how well it’s been looked after, whether it has been in an accident or not and whether it has any rust damage.
In car insurance we also deal with different values such as market and retail. A reputable car dealer will be able to give you an accurate valuation of your car. There are also other sources available to obtain a car valuation for which a fee may be charged. An accurate valuation is important as you do not want to be either over or under insured.
Your car also has an identity number – it is called a Vehicle Identification Number (VIN for short.) The VIN number consists of 17 digits using an alpha numerical code which provide details of the car’s make, model, options, year of manufacture and the serial number.
The VIN number will be recorded when you take your car for an insurance inspection. The number is entered on the car registration card and is also engraved in your car. You will find this near the base of the windshield on the driver’s side dashboard and sometimes on the driver’s side door as well.
A contract is void if it is illegal from the start – also called inherently void. A void contract cannot be accepted in a court of law and will be declared null by the courts; hence we refer to a policy that is null and void. A car insurance contract will be void if a fundamental principle is totally disregarded, for example, someone trying to insure his neighbour’s car. This is not allowed as it violates the insurance principle of having an insurable interest in the item being insured. A void contract is one which is void from the start and differs from a voidable contract.
A voidable contract, on the other hand, is where one of the parties to the contract chooses to have the contract declared void. A car insurance policy could have been in force for some time and constituted a totally legal contract. When the insured party files a claim and the insurance company discovers that the claim was fraudulent they can choose to declare the contract void from the time the fraudulent claim was made.
If the insurance company discovers that there was non-disclosure of material facts at the time the contract was agreed to it will have the right to declare the contract void “ab initio”, meaning from the beginning.
Whenever you claim from your car insurance you are required to carry part of the cost of the loss yourself. Excess is the amount that you will have to pay from your own pocket before the insurance company will pay the rest of the claim. Insurance excess is also called “the first amount payable” or the standard excess. You need to familiarise yourself with the excess payable on your car insurance policy; there are different excess amounts payable on the different types of claims. An accident excess will not be the same as that of a broken windscreen, for example.
An additional excess is payable in some instances – again, check your policy. For example, if a person under the age of 25 drove your car at the time of an accident, an additional excess may come into effect. A third type of excess is called a voluntary excess. Your insurance company may give you the choice of a voluntary excess. If you are prepared to pay a higher excess the insurance company may offer you lower monthly premiums. This voluntary excess amount is over and above the standard and additional excess amounts.
If you accept a voluntary excess you must be sure that you will be able to afford this amount in the case of a claim. An idea could be to place the savings you make on the lower premiums into an emergency fund.