I Bought My Car Cheaper Than The Normal Price. What Price Should I Insure It For?

Dear Insurance Info,
I just got a GL450 2009, though “Tokunbo” yet to be registered. I am considering doing a comprehensive insurance because of the experience I had with my previous ML320.

A lot of times other driver hit me which affected my bumper. Each time, when I looked at the cost of replacement or panel beating, I was left with no option than to just continue driving the SUV with a broken bumper both back and front.

Because naturally, I am the type that doesn’t like to stay on the road fighting to have my vehicle repaired, especially when they start pleading. I end up walking away from the scene and having my vehicle fixed by myself.

Now, I am confused at what rate I should insure my vehicle. It was cheaper for me to bring it in myself as the total value I used in bringing the vehicle into the country is just 50% of the Market value here in Nigeria.

Thanks

Dotun A.

Dear Dotun,

Congratulations on your new car. I have experienced so many car accidents myself and I too, have had to walk away after all the pleading. It is terrible to be honest, because you can’t beg the panel beater to fix your car. So you either have to pay for the damage yourself, or you drive the car with the damage.

Last month, on my way to work, A BRT bus hit my car at Costain roundabout. The traffic was horrible and the man and Lastman were there begging me to please forgive the culprit. The traffic left me frustrated. The fact I was running late left me frustrated. Standing in the heat in a suit, compounded my frustration.

It then occurred to me that I have comprehensive insurance, so I should not be going through all these frustrations. I got back into my car, and drove away.

Recommended: Why you should get excess buyback

Now, to answer your question, the reason why you need comprehensive insurance is to ensure that in the worst case scenario (stolen car, burnt car, total loss etc.) you will have enough money to replace the car again.

So let’s assume that your car is worth N1,000,000.00 but you were able to bring it in for N500,000.00. It means you have saved N500,000.00. I would recommend that you insure the vehicle for N1,000,000.00 and not N500,000.00.

First of all, there is a good chance that if you insure it for N500,000.00 and the worst case scenario plays out, you may not be as lucky to get the car replaced again for N500,000.00.

Secondly, assuming a premium of 4% and 1% for excess buyback, insuring a N500,000 car will cost you N25,000 for a year. While insuring a N1,000,000.00 car will cost you N50,000.00. The difference isn’t much, but the reward is huge. You have already saved 50% off the real value of the car. Please use some of that money to pay to insure the car at the market value of the car.

Doing otherwise would be penny wise, pound foolish. I hope you make the right decision.

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