What scratch and dent cover pays for, and what it leaves out

Scratch and dent cover is a plan, usually paid monthly, that pays a repairer to fix small cosmetic damage to your car, such as a parking scratch or a minor dent. What it pays depends on the plan terms: the size of damage, the number of claims and the exclusions. The provider who calls you can explain their plan.

What is scratch and dent cover?

Scratch and dent cover is a product for small, cosmetic damage. The idea is simple: instead of a repair you pay for yourself, or a claim on your comprehensive car insurance, the plan arranges and pays for the repair, within its own limits.

Olvian does not sell it and does not advise on it. Olvian is a lead-referral service. You ask once, and your request goes to licensed providers who pay Olvian a fee and call you back. This guide explains the questions worth asking when they call. It does not tell you whether to buy, what to buy or how much cover to have.

What kind of damage does it pay for?

Plans of this kind are usually described as covering minor cosmetic damage, for example parking-lot scratches, small dents, stone chips and scuffed alloy rims. Each plan sets its own definition. The wording that matters is in the plan terms, not in the advert.

Look for these in the terms:

• A size limit for each repair. Many plans only cover damage up to a stated size, or damage a technician can repair without replacing the panel.
• A limit on the number of claims in a year or over the life of the plan.
• Which parts of the car count. Paintwork, bumpers, alloy rims and glass are often treated differently.
• A time limit for reporting damage. Some plans require you to report damage within a set number of days.
• Who does the repair. The plan may require you to use its own repairers.

If the plan is sold as an insurance policy, the insurer has to tell you certain things when you claim. Rule 17.8.3 of the Policyholder Protection Rules (Short-term Insurance) says the insurer must disclose to a claimant the information required, where, how and to whom to submit a claim, any time limits on submitting claims, and any excess payable. That is the rule to point to if a provider's claim process is unclear to you.

What does it not pay for?

What is left out matters as much as what is included. Ask for the exclusions in writing, and look for the following.

• Damage that is bigger than the plan's limit. A larger repair is not a scratch-and-dent matter. It may fall under your comprehensive policy instead.
• Damage that was there before you took out the plan. A plan may ask for the car to be inspected or photographed at the start. Ask what the provider does with those photos.
• Mechanical or electrical faults. A cosmetic-damage plan is not a mechanical warranty. A motor warranty is a separate product.
• Damage from an accident, theft or fire. These are the kind of events a comprehensive policy deals with.
• Wear and tear and rust. Ask whether gradual deterioration counts.

Do not assume. The plan terms decide. If a term is unclear, ask the provider to explain it before you accept.

Is scratch and dent cover the same as car insurance?

No. Comprehensive car insurance is a policy that responds to larger events such as collisions, theft and fire, and it comes with an excess. Scratch and dent cover is aimed at small cosmetic repairs. The two are meant to sit side by side, not replace each other.

How a scratch and dent plan is classified is for the provider to explain. Some may be insurance policies. Others may be a service arrangement. That matters, because the rights that apply differ: an insurance policy falls under the Policyholder Protection Rules, while a service arrangement falls mainly under the Consumer Protection Act 68 of 2008. Ask the provider plainly: "Is this an insurance policy, and who is the insurer?" Their answer tells you which set of rules, and which complaint route, applies. The dealership guide in this series sets out those routes.

What should you ask before you agree?

Ask these questions on the call. They are factual, and the provider can answer them.

1. Is this insurance, or a service plan? Who is responsible for paying the repair?
2. What is the maximum size of damage for one repair?
3. How many claims can I make, and over what period?
4. Do I pay anything when I claim? If so, in what circumstances?
5. What is excluded?
6. Must I use your repairers, and how do I report damage?
7. How long is the plan, and what happens at the end? Does it renew automatically?
8. How do I cancel, and what do I get back?

Under section 14 of the Consumer Protection Act, where a consumer agreement is for a fixed term, the supplier must notify you in writing, not more than 80 and not less than 40 business days before the term ends, of the impending expiry and of any material changes if the agreement continues (s 14(2)(c)). If you do nothing, the agreement continues month-to-month unless you direct the supplier to end it or agree to a renewal for a further fixed term (s 14(2)(d)). Section 14 does not apply to transactions between juristic persons (s 14(1)).

What should you check in the paperwork?

Before you accept, ask for the plan schedule and the full terms. Check the details on them match what you were told: your name, the car's registration and details, the start date, the length of the term, and the way the plan ends or renews. If you were told something on the call that is not in the paperwork, ask for it to be added or put in writing.

Keep the documents where you can find them later. If you ever need to claim, the plan terms decide what is paid, and a short, clear record of what you agreed makes any later conversation with the provider easier.

Do exclusions and limits have to be pointed out to you?

Yes, where they limit the provider's liability. Section 49(1) of the Consumer Protection Act says a notice or a provision of a consumer agreement that purports to limit the risk or liability of the supplier, to make you assume a risk or liability, to make you indemnify the supplier, or to be an acknowledgement of a fact by you, must be drawn to your attention in the manner the section requires. Under section 49(3) it must be written in plain language. Under section 49(4) it must be drawn to your attention conspicuously, in a form likely to attract the attention of an ordinarily alert consumer, and before you enter into the agreement or are asked to pay. Under section 49(5) you must be given an adequate opportunity to receive and comprehend it.

Section 51(1)(b)(i) adds that a supplier must not make an agreement subject to a term that purports to waive or deprive you of a right under the Act.

In plain terms: an exclusion or limit that matters should not be buried. If the provider reads the limits to you on the call, ask for the same words in writing. If you cannot find an exclusion the provider relies on later in the documents you were given, say so when you complain.

Who answers the judgement questions?

Whether the plan is worth having for your car, your parking habits and your financial position is a judgement call. Olvian does not make it, and this guide does not make it for you. The licensed provider who calls you is the person to answer it, and you are free to say no.

You also do not have to decide on the call. Ask for the written terms first. Section 48(1) of the Consumer Protection Act says a supplier must not offer or supply services on terms that are unfair, unreasonable or unjust, and Rule 18.10.1 of the Policyholder Protection Rules requires an insurer to tell you how to reach the relevant ombud at point of sale and when a claim is repudiated. Both are there for you to rely on if something goes wrong.

Sources

• Policyholder Protection Rules (Short-term Insurance), Government Notice 1433, Government Gazette 41329, 15 December 2017: https://lawlibrary.org.za/akn/za/act/gn/2017/1433/eng@2017-12-15
• Tranche 2 amendments to the Short-term Insurance Policyholder Protection Rules, September 2018 (National Treasury): https://www.treasury.gov.za/twinpeaks/Policyholder%20Protection%20Rules%20and%20Supporting%20Document/Tranche%202%20amendments%20to%20the%20Short-term%20Insurance%20PPRs%20Sept%202018%20(track).pdf
• Consumer Protection Act 68 of 2008, Government Gazette 32186: https://www.gov.za/sites/default/files/32186_467.pdf
• National Financial Ombud Scheme: https://www.nfosa.co.za
• Motor Industry Ombudsman of South Africa: https://www.miosa.co.za
• National Consumer Commission: https://www.thencc.org.za
• Financial Sector Conduct Authority, Financial Consumer page: https://www.fsca.co.za/Financial-Consumer/