Car insurance shock

Life couldn't be better. You've got rid of that unreliable old skedonk thanks to a birthday surprise from your dad of the deposit on your new car, and you've already been driving for 18 months without so much as a scratch to your name.

Can life get better for a 21-year- old?

Probably not - but it could get a lot worse if you haven't read the small print on that insurance policy.

Fact is, you might end up paying a lot more than you think if you have an accident or if the car is stolen from outside college.

I was contacted by one such dad who had just helped his daughter buy a brand-new Hyundai Atoz, the deal having been sweetened by a free three months' insurance deal.

However, when dad read the insurance quotation he was horrified.

There were a number of excess amounts that would have to be borne by the owner in the event of an accident or loss from theft.

The first, called "basic" is 10% of the claim, with a minimum of R2 500.

Now that's a fairly normal amount across the industry, and not excessive in this day and age - though we wonder how a 21-year-old is going to come up with that sort of money, which has in this case to be paid in cash to the insurers prior to authorisation for repairs?

Dad again?

Then there are a number of "discretionary additional amounts". And this is where it gets really scary.

• "Driver under 22 years old" - 10% of claim, minimum R5 000.

• "Driver's licence less than 2 years" - 10% of claim, minimum R2 500.

• "Vehicle stolen or damaged by attempted theft whilst not kept in a locked garage overnight" - 10% of claim, minimum R2 500

And the last one is a real beaut, especially for a "free" insurance policy for 3 months:

• "Claims in the first 90 and last 30 days of cover" - 10% of claim, minimum R2 500.

Add all that lot together, and if you're a youngster under 22 who has been driving for 20 months, and you're living in res. and forced to park outside, you could theoretically find you'll only get half the value of your brand new car back if it's stolen from outside your room.

Could this in fact happen?

I spoke to Lynford Clarke, of insurance brokerage Hamford, which put together the Hyundai policy, and he said it would be most unlikely that owners would be asked to cough up more than a maximum of 15%.

Fair enough -but that still amounts to R10 500 if your R70 000 car is stolen, and certainly rough on a student who has taken every precaution to prevent theft, but couldn't afford, or get access to, a lock-up garage.

And he said that in the case of the free Hyundai insurance the "90 days" excess would not apply.

But there's still the possibility that the insured might have to pay more "in extreme circumstances" - which Lynford said would be "blatant recklessness or negligence".

He cited an example of a youngster losing control and wrecking the car while hammering it at 130 km/h in a 60 zone at 3 am, possibly while under the influence of drink or drugs.

That's to be expected.

But what about the innocents, those whose cars are stolen - and how do you protect yourself?

Firstly, says Lynford, make sure you understand what you're signing when you apply for insurance.

"In our case we ask our customers to sign at the bottom of a separate sheet which outlines the excesses, and we will not accept an application without this signature", he says.

"Our policy is under-written by Hollards. and these are consumer-oriented insurance people who we have found to be nice to do business with, " he said.

However, he warned that ANY cheap insurance could prove expensive in the event of a claim.

"It is common throughout the insurance industry that where insurance premiums are low, excesses are high," he said.

He added that although it might appear there are many "discretionary excesses", insurance companies have to protect themselves against all eventualities.

Better to pay more now than get caught out later.

Or maybe you can persuade dad to insure your car through his householder's insurance policy.

Insurance companies are keen to get hold of householders' business, and often offer very competitive linked car insurance to get it.