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Monetary Compensation

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Why is the monetary compensation that I receive from my insurer so little when my vehicle has been damaged, stolen or hijacked?

Your insurer’s obligation in terms of the policy wording is usually to pay you the “market value” or the “retail value” of the car less any excess or first amount payable.  That amount will not be more than the maximum cover which you asked for and which appears as the Sum Insured in the policy schedule. 


“Retail value” is usually taken to mean the value for which a dealer would sell the same motor vehicle. 

The Sum Insured represents the maximum liability of the insurer in respect of any claim for loss of or damage to the vehicle and its accessories. The "value" for which you insured the vehicle has very little relevance. It is only a maximum figure, beyond which you have no cover in any event.

“Market value” is usually determined by reference to an average figure between the trade and retail values of a vehicle as published in the Auto Dealers Guide, a trade publication.

In cases where the basis of indemnity is an “agreed value” then the insurer would pay the value agreed upon by the parties in the event of total loss.

“Fair market price" means basically what the reasonable buyer might have been prepared to pay for it had you offered it for sale on the day the loss occurred. This may not coincide with what you would have thought it worth, or your "asking price", but on the other hand it could be more than you might get from a second-hand dealer, or if you "traded it in" on a new car. What you might have received if you put it up for auction might often be a fair assessment. Advertised "asking prices" are usually optimistic. "Replacement" value can be too high.


The insurer may make the following deductions from the market/retail value of the vehicle:

  1. Depending on the perceived or estimated condition of the vehicle, the insurer may deduct an amount based on the make, model, age and mileage of the vehicle.
  2. The policy schedule will make reference to any excesses which the insurer may deduct from the settlement amount.
  3. If there is old damage to the vehicle, which is not accident-related, then the insurer may also deduct an amount which represents the repair cost of the old damage.

How to prove the value of the vehicle:

In the event of a dispute between the insurer and the insured regarding the settlement amount, then the onus is on the insured to furnish sufficient evidence in substantiation of the settlement figure being asked for. This evidence can take the form of statements from yourself, and if possible, others who know the vehicle (e.g. the mechanic who serviced the car and the dealer who inspected the car), about its condition, maintenance, mileage, and manner of use.  However, the insured’s subjective opinion is not relevant.