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Don't be fooled into thinking that a car maintenance plan is an

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Don't be fooled into thinking that a car maintenance plan is an Powered By Docstoc
					Date: August, 21 ,2010 Publication: Pretoria News Weekend Page Number: 16




                                                                                            JUST StGAl HefeE".


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                                 Don't be fooled into
                                 thinking that a car
                                 maintenance plan is
                                 an insurance policy
                                 The wording of motor maintenance plans can mislead you into believing that
                                 you have bought an insurance-type policy. But these products are commercial
                                 arrangements and there is no guarantee that the dealer will fulfil the obligations
                                 of the contract. Neesa Moodley-Isaacs reports
                                  When you buy a veh icle you                                            a maintenance plan, or an insur­
                                  should be wary of being sold                                           ance policy.
                                  motor maintenance plans th at         CONTACT                             Martin says that, on investiga­
                                  are falsely paraded as insurance                                       tion, he frequently finds that the
                                  policies, th e Ombudsman for           The Motor Industry Ombudsman    product is not an insurance
                                  Short­term Insurance says.             is Johan van Vreden.            policy but is a contractual
                                     Brian Martin, th e ombuds­          Telephone: 012 841 2945         arrangement between th e con­
                                  man, has referred the mis­selling      Fax: 012 841 2842               sumer and the car dealer.
                                  of maintenance plans as financial      Email:                             "When you enter into a simple
                                  products to th e Financial Ser­        mi.omboofernart@netactive.co.za commercial contract, you run the
                                  vices Board (FSB).                     Post: Suite 156, Private Bag    risk that the other party (the deal­
                                     Jonathan Dixon, th e FSB's          X025, Lynnwoodridge. 0040       ership) may not be able to meet its
                                  deputy executive in ch arge of                                         obligations and may not be
                                  insurance, says the FSB is moni­                                       around in the future. There is far
                                  toring the motor industry closely.                                     less ch ance of a registered
                                     Consumers who buy a motor         seek assistance from my office." insurer not being able to meet its
                                  maintenance plan often believe           Motor maintenance plans, obligations," he says.
                                  they are purch asing an insur­       which include service plans and      If the product you buy is noth­
                                  ance policy, underwritten by a       motor plans, do not fall under ing more than a contract with a
                                  registered insurer, wh en this is    Martin's jurisdiction because dealer, you need to be aware that
                                  not the case, Martin says.           they are not insurance policies, the only recourse available to you
                                     The confusion arises because      and so his office cannot address may be litigation, which can be
                                  consumers are sometimes fooled       complaints about them.            extremely costly and time­
                                  by the use of terminology such as        Johan van Vreden, the Motor consuming to pursue.
                                  "insurance administrators" or a      Industry Ombudsman, says h is        Once th e Consumer Protec­
                                  description of th e product as a     office deals with all automotive­ tion Act comes into full force at
                                  "policy", he says.                   related complaints, including the end of October, you will be
                                      "Later on, wh en a 'claim' is    those related to warranties.      able to take your complaint to a
                                  rejected by the 'insurance admin­        Martin says th at wh en you consumer court, th e National
                                  istrator', consumers are advised     buy a car, you should check with Consumer Commission or th e
                                   y the so­called administrator to    the salesperson if you are buying National Consumer Tribunal.
                                  b




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Date : August, 21 , 2010 Publication : Pretoria News Weekend Page Number: 16




             The types of motor vehicle-related
             financial products that you can buy
             NON-INSURANCE PRODUCTS                  consumables, such as oil, and            for authorised financial services
             ♦ New vehicle warranty. The             labour costs. It generally excludes      providers and their representatives.
             manufacturer warrants that a new        wear-and-tear items such as tyres             You can check if an insurance
             vehicle is free of defects. The         and wiper blades.                        company is registered by
             warranty covers unforeseen                                                       contacting the Financial Services
             mechanical failure for a specified      ♦ A motor plan covers the cost of        Board on 012 428 8000.
             period of time or distance (for         replacing parts that fail. Martin says        Furthermore, all short-term
             example, the Hyundai warranty is        the problem with motor plans is          insurance companies that belong
             five years or 150 000 kilometres,       that the cover is usually very limited   to the South African Insurance
             whichever comes first).                 and extends to certain parts only.       Association are subject to the
                 One of the conditions of the             "Commonly, there are                association's code of conduct
             warranty is that your car must be       maximum limits, which are                     If you have a dispute with an
             serviced by an authorised dealer        generally low, as to the liability of    insurer, you can seek redress with
             according to the manufacturer's         the service provider, meaning that if    either the short-term insurance
             maintenance schedule. The               a major component fails, you are         ombudsman or the Ombud for
             warranty usually excludes the           likely to be landed with a               Financial Services Providers.
             normal wear and tear of parts such      considerable portion of the bill.             Shehnaz Somers, the head of
             as tyres and batteries; damage due      Loss or damage arising from wear         personal lines underwriting at
             to accidents, misuse or alterations;    and tear is also excluded."              Santam, says while the extent of
             maintenance costs; or damage due             He says motor plans tend to be      cover may differ between insurers,
             to lack of maintenance.                 fairly expensive.                        in general a comprehensive
                                                          "They are also difficult to         insurance policy covers accidental
             ♦ An extended vehicle warranty          understand and, in my view, do not       loss and damage to your vehicle.
             lengthens the manufacturers             represent value for money," he           The norma! perils covered are theft,
             warranty once the term of the           says. He points out that you may         hijacking and accident damage.
             original warranty has expired. This     find you would be better off                  A comprehensive policy also
             type of contract is usually taken out   carrying the cost of repairs yourself    covers you for any amount for
             with the manufacturer.                  or putting aside money on a regular      which you are held legally liable by
                 Brian Martin, the Ombudsman         basis to cover unexpected                a third party.
             for Short-term Insurance, says an       maintenance costs.                            Somers says the other types of
             extended vehicle warranty is                 "You should carefully analyse       vehicle-related insurance include:
             probably the best product for you       the cost of the motor plan in                 ♦ Comprehensive excluding
             to purchase and is likely to provide    relation to the benefits before you       loss or damage caused by theft or
             you with the most security.             sign on the dotted line," he says.        hijacking, or attempted theft or
                                                                                               hijacking;
             ♦ A service plan covers the cost of      INSURANCE POLICY                             ♦ Limited cover, which covers
             having your car serviced at any of      An insurance policy must be               loss or damage only if caused by
             the manufacturer's service outlets.      underwritten by a registered short-      fire, lightning, explosion, theft or
             For example, if you buy a Hyundai       term insurer.                             attempted theft; and
             service plan, you can have your car         Insurers are bound by the terms            ♦ Third party only, which covers
             serviced at any Hyundai workshop        of the Short Term Insurance Act,         the amounts for which you are
             in the country.                         the policyholder protection rules,        legally liable to a third party (for
                 A service plan covers the           and the Financial Advisory and           example, the other driver in an
             regularly scheduled service items,      Intermediary Services Act, which         accident) if the liabilityrelatesto
             such as parts (air and fuel filters).   includes a general code of conduct       your vehicle.




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