Cedric Stephens, Contributor
Question: I have an Act policy. What am I entitled to in the event of an accident where I am not at fault?
- Reader via text message
HELPLINE: The short, easy answer to your question is zilch, zip, zero, nought, or, if you still do not understand, you get absolutely nothing.
The response would be the same if you bought a Third-Party Policy. The former is the creation of The Motor Vehicles Insurance (Third-Party Risks) Act.
The Third-Party policy is similar to the Act policy but with a little bit extra. Owners and or drivers of vehicles that operate on the public roads are required by law to carry a minimum amount of insurance.
The Motor Vehicles Insurance (Third-Party Risks) Act is much like the Minimum Wage Act.
The latter law gives the minister the authority "to fix minimum rates of wages for any occupation in the island" where in his opinion, "wages are unreasonably low".
The key word there is minimum. The limits in the motor-vehicles insurance law are also minimum sums. They apply to legal liability resulting from accidents which cause personal injuries to third parties and damage to their property.
A third party is an "outsider who has no legal interest in the (insurance) policy". This is precisely why the policy benefits will go only to the third party in an accident where you are at fault.
Section 5 of the motor-vehicles insurance law says that in order to comply with the requirements, the policy must insure "such person, persons or classes of persons, as may be specified in the policy, (in your case you) against any liability incurred by him or them in respect of: (i) the death of, or bodily injury to, any person; and (ii) any damage to property, caused by or arising out of the use of the motor vehicle on the road".
The limits that apply are:
(a) bodily injury claims to any one person, not less than J$1 million;
(b) not less than J$3 million for all bodily injury claims arising from one accident;
(c) J$500,000 to any person for property damage claims; and
(d) J$1 million for all property damage claims in connection with the same accident.
The limits in Section 5 were set many years ago.
Unlike the Minimum Wage Act, where the minister has the power to adjust the minimum amount paid from time to time, the limits in the Motor Vehicles Insurance (Third-Party Risks) Act appear to be cast in stone.
As a result, buyers of these policies who have the misfortune to cause accidents come in for nasty surprises.
Victims of collisions involving vehicles that are insured under Act policies often suffer due to their inability to recover the full amount of the claims that they make against the at-fault driver.
Many insurers take the view — based on the size of court awards, the frequency of accidents, their operating costs and the size of the average third-party claim — that it makes no sense to write Act policies. The biggest motor insurer, for example, has stopped selling Act policies.
Other companies take the opposite view. They argue that an Act policy is much better than no policy.
There is much merit in that argument. If Florida were to be used as the measure, more than one out of every four vehicles on local roads is uninsured.
The rising cost of motor insurance plus the hard economy will push that number much higher. One company executive has told me that her company offers a wide range of Act and Third Party policies to meet the needs of their customers.
The limits in these policies start with those specified in the Act to much higher amounts. The products come in many sizes and flavours. Premiums depend on the age of the vehicle and start as low as J$13,000 for Act coverage as compared to J$21,000 for the most basic Third-Party policy.
Ron Lieber who writes the 'Your Money' column for The New York Times, in a recent column titled "How to Know If You Have Enough Auto Insurance", posed the following questions: "Is it worth saving US$25 or so a month [in our case say J$1,750 per month] to leave yourself exposed to the highly unlikely worst case (motor-vehicle accident where you were at fault)? Or would you sleep better at night knowing that you could cross that off your list of things to worry about?"
Lieber chose the 'sleep better at night' crowd. I agree.
This is because even though an Act policy would not pay to repair my car in an accident that I caused, it could help in some way to save me from being ruined in the event that I was sued by a third party.
Cedric E. Stephens provides independent information and free advice about the management of risks and insurance. Send feedback to firstname.lastname@example.orgSMS/text message to 812-7233