A waiver in insurance terms usually refers to an extension of a specific cover which was excluded in the original policy document. The word waiver could have a number of meanings such as:
- The surrender of a right or privilege that exists. For example, in car insurance contracts you will usually find that an excess is payable when making an insurance claim. Asking the excess is the insurance company’s right in terms of the contract. If your car insurance company agrees to grant you an excess waiver they do away with their right to the excess. This will be done in exchange for a bigger premium being asked every month.
- An endorsement to the car insurance policy excluding certain types of losses. An example could be certain injuries sustained in a car accident.
- An endorsement that limits the maximum amount to be covered for all or specific losses.
Waiver could have the same meaning as rider and endorsement – also see these entries in the glossary.
A warranty is a term of an insurance contract that must be strictly adhered to. In car insurance a warranty is a promise (or undertaking) to comply with a specific condition. Failing compliance of a warranty is very serious as it could invalidate the policy. A warranty is a common law principle that gives the insurer the right to cancel a contract, no matter how big or small the breach was.
As an example, your car insurance company promise to give you a discount on your monthly premium provided that your car is fitted with a tracking device. You are also responsible to ensure that the tracking device is in good working order at all times. If you fail to carry out the stipulation of the warranty the insurance company has the right to repudiate your claim should your car be stolen. This is called a promissory warranty – something the insured party must do or refrain from doing.
An affirmative warranty is giving a statement of fact. An example: You, as an insured, warrants (or promises) that all the information you have provided regarding the car insurance contract is correct.
A new car warranty is the promise, or guarantee, given by a car manufacturer for a certain period or condition (a specific number of kilometres travelled) during which time the car will be repaired free of charge.
When your insured car has been involved in an accident your insurance company will send out an insurance assessor, also referred to as an adjuster, to calculate the damage in monetary terms. The insurer needs to make a decision as to whether the car will be repaired or written off.
If the cost of repairing the car is more than its market value, the insurer will decide to write off the car. The market value the insurance company will use is calculated at what your car was worth before the accident. Property so badly damaged that it is not worth repairing is acknowledged by the insurance company as a total loss and written off.
You will be paid out the fair market value of the car to replace your loss. A point to remember is that if you still owe any money on the car, the insurance company will first settle the outstanding loan with the bank. A situation could arise where the outstanding loan exceeds the insurance payout; you will be personally liable for the shortfall. Specific insurance can be obtained to protect you against a situation such as this.
Once the insurance company has settled your claim the damaged car, called salvage, becomes the property of the insurer and they will sell it, if possible, to offset their costs.