What is Motor Vehicle Insurance?

Written by Wellington Ayugi

Many people who obtain motor vehicle insurance do it out of necessity. Having the policy is a legal requirement and driving without one is a serious breach of law. You will also find a significant number of motorists who bought them because it is the norm to have one.

To better understand motor insurance we have to identify the vehicle classification system. The vehicle classification system classifies cars as either commercial or private depending on the model and use.

Private cars are covered under motor private car insurance and are usually meant for domestic travel, social and leisure activities.

Commercial cars are mainly used for business and official use and the terms of their policy will differ from the private car policy.

Motor insurance falls under three categories, namely:

  • Third party insurance only
  • Comprehensive insurance
  • Third party fire and theft

Third Party Only

This is the lowest level of cover issued by insurance providers. In addition to being the cheapest, it is the minimum cover required for a motorist by law. The policy covers damages and expenses to a third party if an accident was caused by the insured. It, however, does not cover the policyholder for damages to his car resulting from the accident.

Comprehensive Policy

This plan covers all the potential risks that may arise from an accident. For instance, if the third party got injured as a result of the accident caused by the policyholder, the plan would cover the damages and injuries the third party sustained. In the case the accident is caused by the third party, the insurance will compensate the policyholder. The same applies if the insured’s vehicle is stolen, vandalized or set ablaze.

Third-party, fire and theft insurance

This policy has the same characteristics as third party insurance but goes further to cover you from liabilities resulting from theft and fire. In the event the car is stolen or destroyed by fire, the policy will replace the lost car. The policyholder pays a higher premium for this policy.

Benefits of Motor Insurance

You should have a motor vehicle insurance policy because:

  • It protects you from liabilities that would otherwise be very expensive and possibly destabilize your finances
  • The victims of accidents can be compensated for medical expenses and damages from accidents which would be a slim possibility without insurance
  • Motor insurance is a legal requirement and hence not having one can result in penalties and fines.

The motor insurance policies are subject to provisions, restrictions and limitations, therefore, it’s important to understand the details in your policy.


About the author

Wellington Ayugi

Wellington Ayugi handles Business Development at Covered and has a passion for personal finance, microfinance, and developments in financial technology