IN the next few weeks we will look at various types of motor insurance covers offered on the Zambian market.

To begin with we will discuss third party insurance.

In order to understand what third party covers, we must define the three parties involved in insurance.

The first party refers to the insurer while the second party is the insured (these terms may be used interchangeably).

The third party is any other party affected by the usage of the vehicle of the insured such as other motorists, pedestrians, cyclists, etc.

With this explanation it becomes easier to understand what third party insurance covers.

When the second party or insured is using a vehicle say, driving on a public road, there are associated risks such as hitting another vehicle, a pedestrian or into a building.

Applying the rule on the road that requires the one who causes damage to pay, the owner of the vehicle is obliged to meet the expenses necessitated by the vehicle that rammed into such assets.

The expenses might include the cost or repairs to the other vehicle or repairs to a building.

If the accident involves a person, then expenses include medical bills compensation of the affected party against injury or death.

With all these potential pay outs, insurance comes in to pay on behalf of the owner of the vehicle through third party insurance.

This significantly helps the owner of the vehicle in the sense that he might not have money when such unforeseen incidents occur but can rely on his insurance to pay on his behalf.

This is the rationale behind third party.

There is no cover to repair damages to the vehicle of the insured.

The current standard limits are K30,000 for property damage and K30, 000 per person or K60,000 on aggregate for injury/death.

This means that the owner of the vehicle or insured will be protected only up to these limits.

If the losses are within the stated limits as in most cases, the insured is not involved further except to pay excess, the 10 per cent contribution or the uninsured loss in respect of property damage, no excess is paid for injury/death claims.

However, if the accident involves damages that go beyond the property damage limit for example, the difference will have to be borne by the insured.

This also applies to injuries or death claims.

The insurer will pay the full limit after adjusting the loss and then ask the insured to take up the difference.

For this reason customers are always advised to increase these standard limits especially for commercial vehicles.

Imagine a truck hitting into a Mercedes Benz valued at K200,000 and becomes a write off.

The standard third party of K30,000 is far from being sufficient to pay the loss.

The insurer will quiet alright pay their limit but the difference of K170,000 must come from the insured.

This may put the insured in an awkward position because they may not have the resources available to pay that difference.

Therefore to be safer, it is important to have adequate limits above the standard ones required by law.

There is another form of third party insurance called Act only.

It covers the insured against injury or death necessitated by the insured vehicle.

It is the barest minimum one can buy in Zambia.

I would not encourage anyone to get this cover and further, I would recommend that it should be abolished on the market.

Many people who buy this insurance are those in transit and do not really understand it.

All they are interested in is to minimise expenses by purchasing the least expensive type of insurance to fulfill the law.

Real problems arise if there is an accident.

A few years ago, my car was involved in an accident with another motorist who was at fault.

After processing the claim, I only realised that the other person had Act only, hence I could not claim for property damage.

As far as he was concerned he had insurance which was supposed to sort out the loss.

How many people find themselves in such situations?

It is therefore important to buy full third party which includes the property damage component.

In 2016, insurance cost has reduced by virtue of Government removing Value Added Tax on general insurance.

This means that instead of paying K580 for one year on a private motor vehicle you only pay K515.

After you pay this amount you must obtain an insurance disc for displaying on your windshield as required by law with effect from February 14, 2016.

For more information get a copy of Basics of Insurance, The Zambian Experience Book from any Bookworld shop or Radio Christian Voice.

Comments:webster@picz.co.zm or webster_tj@hotmail.com or on facebook search for Insurance Talk- Zambia page or call/text 0977 857 055

[The Author is a Chartered Insurer with more than eleven years industry experience]