An accident that causes injury or death can have disastrous consequences for the person responsible. If you are held personally liable insurance may be the only thing protecting you and your dependants from bankruptcy.

“Liability awards are getting bigger,” says Gari Dombo, Managing Director of Alexander Forbes Insurance.

For example, in March it was reported that Mr. Harry Wessels, a 38-year-old farmer, was paid R10-million after suffering severe brain damage following an accident. The original claim amounted to R20-million.

There is also currently a claim against the Road Accident Fund by a Swiss national for R60-million.

Surprisingly cheap premiums

“Given the increasing value of liability settlements handed down by South African courts, policy holders should buy the highest liability cover that they can afford. Limits of up to R30-million are available at surprisingly cheap premiums.”

Massive liability does not only attach to instances of damage to life and limb — property damage has the potential for huge liability as well.

“If you are responsible for a fire that spreads to a parking lot, an adjacent building or an electrical installation, the repercussions can be enormous,” explains Dombo.

Furthermore, given South Africa’s high incidence of alcohol related accidents it makes sense to consider what your insurance policy says about driving under the influence.

“Despite rampant death and destruction on our roads South Africans continue to drink and drive, adopting a devil may care attitude to road accident statistics and official warnings.”

Insurance unlikely to pay out if over alcohol limit

Even though most people know that their motor insurance is unlikely to pay out if they are in an accident when driving over the legal blood alcohol limit, they continue to take this risk regardless of the consequences.

“Most people don't know that if the nominated driver is drunk and the owner is unaware of this the owner would still be covered for damage to his vehicle, but the nominated driver would be personally liable.”

The applicability of alcohol exclusion is not set in stone and some policies are stricter than others.

Stricter policies have an absolute exclusion of cover if any driver is under the influence. Others specifically exclude cover when one is over the legislated minimum requirements while others specifically state acceptable minimum levels.

“Looking closely at your policy detail will put you in a better position to know which of your buddies should be driving you home or, indeed, how much additional personal liability cover your should be purchasing — not being drunk and having sufficient personal liability cover is, however, still your best bet.”