The key to adequate insurance is what the experts call the 'Basis of Loss Settlement'. Your insurance policy document will spell this out so it is a good idea to make sure you understand this industry jargon. Policy wording differs in this respect and you could be in for a nasty surprise in the event of a loss. It all has to do with the values used in defining that basis, notably retail and market value.

Retail value vs market value
Retail value is the price at which the dealer will sell a second hand vehicle to you, explains Field. Market value is the average of the difference in price between retail value and its trade-in value, — what you could expect to receive from a dealer, were you to trade the vehicle in.

Auto dealers use a guide to establish trade and retail prices of cars: The Meade & McGrouther Auto Digest, which is the auto industry price 'bible'. So in other words, if a vehicle has a trade-in value of R320 000, while its retail value is R400 000, the difference in the two values is R80 000, but it is the average of that difference (R40 000) that is used to calculate the market value of a vehicle.

Basis of Loss Settlement
"In this example therefore, the market value Basis of Loss Settlement would be R320 000 plus R40 000 = R360 000, leaving you with a shortfall, if you wanted to replace the loss with a second-hand vehicle of the same make, model and year of manufacture.

"Many policies will, in fact, pay out at 'brand-new-out-of-the-box' value, also known as 'list price', but usually only for no more than six to 12 months after purchase, reverting to cover for market value or retail value thereafter.

"More rarely, other policies will pay out only at one of the lesser values from the outset of the policy. It all hinges on that critical 'Basis of Loss Settlement', so check what you have," suggests Field.

Excess
"If you are unhappy with your Basis of Loss Settlement, you can always change insurers, but obviously it makes sense to get it right, according to your needs, first time." And keep in mind that, irrespective of the basis of your cover, you have to pay an excess, usually between five and 10 percent of any claim.

"Also, if you have financed the vehicle, you could be liable for the credit shortfall at the time of the loss, although happily this can be insured. What this all tells us is that, while your vehicle insurance is essentially about indemnifying you against the loss of your expensive luxury vehicle, there's no such thing as uniformity for the basis of that indemnity.

Comprehensive cover
"Further, check whether the vehicle is comprehensively covered or only for theft and damage in an accident, or only for damage to a third party vehicle and whether you have added benefits such as medical cover and roadside assistance and extensions to your cover, including adequate legal liability cover, cover for hail damage and premium waivers should you be retrenched or pass away.

"And are there any exclusions on your policy — for example you may only be covered for theft from your home if the vehicle is parked in a locked garage.

"Clearly, there are all sorts of pitfalls to guard against and there's a strong case for a broker's advice and for that matter, broker intervention in the event of a claim."

Tracking devices
As for other considerations, Field, who defines an executive car as any model priced over R200 000, says you also need to get into the habit of testing your tracking device from time-to-time.

The bad news is that, if the device is not operational at the time of a loss, your claim could be repudiated. It's advisable to test it every three or four months or whenever you have undertaken major electrical work which could have affected the device.

The tracking company will have a record of a test — sufficient proof it was working at the time of a loss. And note that only a South African Insurance Association (SAIA) approved tracking device is accepted by underwriters.

Specified driver
Other suggestions: Make sure your policy spells out who is allowed to drive the car other than the owner-driver. Unhappily, you can wake up after a loss to find that without such specification you don't have a claim. This applies to anyone who is not specified as a regular driver in the policy, including, say, a driver at a garage servicing your car!

Add-ons
Value your cars add-ons correctly. You may make the mistake of not taking towbars, cellphone car kits, navigation systems and sound systems into account. And if you happen to be going across the border into, say, Mozambique or Botswana, make sure your policy provides for recovery of your vehicle in a neighbouring state — such cover is not a given and rescuing your vehicle from the depths of Botswana could be expensive.

Spares
A final point — distributors may not keep 100 percent spares in stock in South Africa and if the vehicle is involved in an accident, you may wait weeks for a part to arrive and repairs to be completed, so take out sufficient car hire cover.

"These and other niceties should all be part of a brokers' service and the bottom line is: Consult the experts before signing up for cover which may give peace of mind, but which could come up short when push comes to shove," says Field.