With any form of insurance you will generally be asked to declare any material facts. This means that simply answering the questions that are asked of you by the insurance company is not enough, you are obliged to tell them of anything that could influence their decision as to what they charge you, or indeed whether they insure you at all. They call this acting in utmost good faith.
Not only do you have to declare all material facts but you must tell them of any changes to material facts once you are insured; a motoring conviction is one example. It can be advisable to inform the insurance company of any changes in writing and if you want to be really safe, send it recorded delivery.
Other examples would be changing your occupation, changing your address, a change in your health, or modifying the vehicle in some way; this doesn’t necessarily mean modifying the engine to make the car faster, it could simply be fitting a larger wheel and tyre.
If you were to lose control of your car and have a serious accident, your insurance company’s inspectors will investigate all possibilities as to why this has happened, so the brakes and the tyres would almost certainly come under scrutiny. Ultimately an insurance company’s responsibility is to its shareholders and looking after the shareholders interests, does not include paying out claims when they can be repudiated.
It is also worth bearing in mind that if you have an accident and you car is a total loss, the insurance company will normally pay out the current value of the vehicle, however if it is a lease car you are effectively terminating your contract hire agreement early and there will be early termination penalties to pay. These penalties will not be covered by your insurance company and ideally what is needed is a GAP Insurance policy to protect against this eventuality.
One form of GAP Insurance is what is known as, Return to Invoice (RTI) GAP Insurance, which is effectively a supplement to a comprehensive insurance policy. This means that it will provide an additional sum of money (the difference between the current market value and the original invoice price). In the case of a lease car it will allow the car leasing company to receive the market value of the vehicle, as they are entitled to, and additionally provide funds towards the early termination penalties that can be quite severe.
With any form of motor insurance there are terms and conditions with which you need to comply, negligence is not covered; if you leave your keys in the car and it is stolen, the insurers will not pay out. The same applies if you are at the time of the accident, under the influence of alcohol or drugs.
It is very important to answer all the questions on a motor insurance application form correctly, if you do not, you run the risk of giving the insurance company the best of both worlds; they can take your premiums, pay out on minor claims and use your non disclosure or misinformation, to justify not paying out a large claim.
If your insurer refuses to pay out on a claim, do not just assume they are correct in doing so, you can always ask The Insurance Ombudsman to examine the case and make a decision.
If a car that you own is written off and the claim is not met by the insurer, you have lost your investment. If however the vehicle is a contract hire car the situation is potentially more serious; not only do you owe the car leasing company the current value of the vehicle, you will have terminated an agreement early and will be liable for penalties. Perhaps now may be a good time to consider the information you originally provided to your insurer and make sure there were no errors or omissions.
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