Legal Tips

Common Terms and Conditions in Motor Policies

Document Date: 10-Dec-2010

Here are some Common Terms and Conditions in "Motor Policies":

Please explain the following common clauses that are found in motor policies

• Extending Cover to an Authorised Driver
• Duty to Maintain the Insured Vehicle
• Limitation as to Use
• Licensed to Drive
• Driving under the Influence of Liquor/Drugs

1. Extending Cover to an Authorised Driver
   
   In addition to covering the owner of the vehicle, the motor policy also covers any other person who is driving with the owner's permission. Such a person is known as an authorised driver. This clause covers situations where the owner allows somebody else to drive the vehicle.
   
   
2. Duty to Maintain the Insured Vehicle
   
   The insured has a duty to maintain the insured vehicle in an efficient or roadworthy condition. This is to ensure that the vehicle is safe enough to be driven on the roads and also reduces the risk of accident.
   
   
3. Limitation as to Use
   
   The motor policy limits the use of the vehicle by expressly stating the purposes for which the vehicle may be used. The policy covers the vehicle when it is used for social, domestic and pleasure purposes and in connection with the insured's business. Some of the uses not covered under the policy are use for hire or reward, racing and carriage of goods in connection with any trade or business.
   
   
4. Licensed to Drive
   
   The insured or his authorised driver must be licensed to drive under the relevant laws when using the insured vehicle. They must not be disqualified from driving in any way.
   
   
5. Driving under the Influence of Liquor/Drugs
   
   The motor policy does not cover any person who is driving the vehicle under the influence of liquor or drugs. No claim for damage to property will be paid in such a situation. Third party claims for injury or death will be paid but will be subsequently recovered from the insured and/or the authorised driver.
   
   
6. No Claim Discount (NCD)
   
   
   1. If the insured has not made a claim for a year or more, the insured is entitled to a No-Claim Discount (NCD). The NCD reduces the policy premium for the following year. The table shows the discount enjoyed by an insured in respect of the premiums payable if no claim is made the NCD is set.
      
      

      Private motor car  insurance		Commercial motor vehicle & motorcycle insurance
      Period of Insurance	Discount on renewal	Period of Insurance	Discount on renewal
      1 year	10%	1 year	10%
      2 years	20%	2 years	15%
      3 years	30%	3 years	20%
      4 years	40%
      5 years or longer	50%

      
      
   2. If at the time of a claim the NCD is 20% or less, the NCD shall be reduced to Nil at the next renewal of the Policy.
      
      
   3. If the insured fails to comply with the condition on reporting, the NCD will be further reduced as shown in the following table:
      
      

      Private car policies		Commercial vehicle & motorcycle policies
      Existing NCD	*Upon Renewal (Non-Reporting) This is the resulting NCD after such reduction	Existing NCD	*Upon Renewal (Non-Reporting) This is the resulting NCD after such reduction
      50%	40%	20%	15%
      40%	30%	15%	10%
      30%	20%	10%	0%
      20%	10%
      10%	0%
      0%	0%

      
      *The NCD affected by the accident is to be applied first before the Non-Reporting NCD.
      
      
7. Excess
   
   An excess payment, also known as a deductible, is a fixed contribution that must be paid each time a car is repaired using a motor insurance policy.  If the insured vehicle is declared to be a “write-off” or “totalled” the excess will be deducted from the settlement payment made to the insured.
   
   If the damage was due to an accident in which another vehicle’s drive was at fault, and this is accepted by the other vehicle’s insurer, the insured may be able to re-claim the excess paid from the other vehicle’s insurer.
   
   

[Ref: LG/VY/Mar 2011]