January 5, 2018
You are coming home late from visiting friends and on the freeway you suddenly hear a terrible noise coming from your engine. You call the emergency assist from your insurance company, who comes rushing out 20 minutes later. They quickly establish that your car had a serious mechanical failure. The first question that comes to mind is “Is this engine damage covered?”
When you buy a new car or quite a new car, what is usually included is a warranty and motor plan. It can be confusing but it’s important to know the difference between a car warranty, a motor plan, and a service or maintenance plan. Once you are clear about each one, and are sure what is in each contract, you will know what cover to get for what. In addition, should you break down, you’ll know who to call! It’s all about what you can afford – mechanical or electrical failures can be really expensive, and so you need to be covered for those. Prevention is better than cure, as the saying goes, so making sure that your car goes for regular services will minimise the chances of anything else suddenly breaking down.
Let us take a look at these different plans and establish what each one has to offer.
Most car manufacturers will supply you with a warranty that is effective for some time after the purchase of your new car. The warranty covers any faulty mechanical or electrical components. Understandably, warranty periods vary from one manufacturer to the other, but usually last for about three to five years, or for a certain distance travelled. Warranties cover costs for repairing the large parts of a car, such as the water cooling system or head gasket, and the gear box.
A service plan will pay for the total cost of the regular car services, that are either done annually, or when a certain mileage is reached. The service plan covers the usual items, such as air filters, oil filters, fuel filters, lubricants, spark plugs and coolant. Any additional repairs will have to be paid by the vehicle owner.
A maintenance plan is more comprehensive, because it not only covers the regular services of the car (including labour), but also covers the cost of repairing parts due to wear and tear. Examples of parts that are covered are brake pads and brake discs, shock absorbers, battery, and windscreen wipers. It can be seen from the above, that a maintenance plan is a much better choice when compared to a service plan. If it does not cost too much extra, it is a good idea to upgrade from a service plan to a maintenance plan. In some cases you can have both.
It now gets a bit more complicated. A motor plan includes the benefits of a service plan and maintenance plan as one package, which means the owner benefits considerably more. Sometimes, the motor plan may also include a warranty. However, it is important to remember that neither a warranty nor a motor plan provide cover for any damage caused in an accident. For this you need a car insurance policy that covers your car in the event of an accident.
As a vehicle owner, you need to consider the following:
What is emphasised over and over is the critical importance of what exactly does your warranty cover. For instance, once you know what the warranty offers you, you will be spared from having one of those nasty surprises when the car breaks down.
A common issue is that people purchase a car with an additional motor warranty, only to discover that when it comes to crunch time, their claims are rejected. This is because clients often tend to not understand their warranty agreements. Possibly, the onus lies on those selling the warranty to ensure that the customer does understand what is covered and what is not. The customer also needs to be responsible in making sure that he or she understands what is being conveyed by the seller of the warranty agreement. You need to know the product – it will cost you quite a bit, right?
Any items that are not covered by the standard warranty can be covered by a top-up warranty. This is similar to Gap cover in the medical aid industry, where Gap cover pays for the difference between the medical aid rates and the medical specialist rates.
It’s a no-brainer that the older a car becomes, the greater the chance that there can be mechanical or electrical failure. To repair cars that are out of their warranty can be really costly, with the bill easily reaching R10,000. Warranties fall under the Short-Term Insurance Act, and cover a car for mechanical and electrical failures. Sometimes, also included in the package are additional services such as roadside assistance, car rental, medical assistance and so on.
In South Africa’s current economic climate, extended warranties play a key role. This is because most motorists may only be able to purchase pre-owned cars, which of course no longer have the original warranty in place. By having an extended warranty, the car owner has now the same security as the original owner did with the new car warranty. The additional advantage is that these warranties can be transferred between different vehicle owners. This means that a pre-owned car will have a better re-sale value.