Personal Finance

What does cash in lieu mean in motor insurance parlance?

Insurers may elect to provide cash in lieu of repairing your car. PHOTO | CHARLES WANYORO
Insurers may elect to provide cash in lieu of repairing your car. PHOTO | CHARLES WANYORO 

Cash in lieu in the vehicle insurance industry parlance refers to where a company exercises the option of giving one cash for repairs instead of repairing it for the client.

There are a number of ways an insurance company can settle a motor insurance claim.

They include repair of the car, compensating the client in case for total loss, and giving one cash for repairs.

Insurance companies are technically liable for one suffering injuries as a result of poor car repair.

Thus, an insurance firm that wants to avoid this kind of situation pays the cost of repairs instead of contracting another party to do it. But that is often not the case in Kenya where insurance companies arrange for repairs in a bid to save money.


An insurance company can opt for cash in lieu in a number of instances.

A standard motor insurance policy document in Kenya states that cash can only be provided where the parts to be replaced are out of stock and waiting for restocking can take inordinately long, or where the parts are not available at all, like in the case of older models.

Another instance is where an insurer knows that your vehicle was repaired poorly in the past, or it has corrosion in the same area of damage.

An insurer is not liable for poor previous repairs or corrosion on your vehicle. They can argue that they are putting the vehicle in a better position than it was previously therefore going against the principal of indemnity.

They would therefore be putting you in a better position than the contract allows as a result of an accident.

In this case they may elect to provide cash in lieu of repair to fulfil the contract they have.

Your insurer may well be in breach of contract if they do not cover the full cost of repair that you have incurred in having your vehicle repaired at your choice of repairer.

But here, the company will offer you what it would cost them to repair at their approved repairer. This sometimes results in the insurer paying you less than what you would have wished.

Also remember that an offer to indemnify you doesn’t mean you have been indemnified.

What some companies in this country are doing, offering clients less cash in lieu than what would cost to independently repair the vehicle, is wrong.

They usually offer the compensatory amounts, less VAT and costs such as labour charge, in a scheme that leaves a bitter taste in the mouths of clients.

It is wrong not to factor in any cost that will properly compensate the client.

An insurance claim is compensatory in nature and any attempt by the insurer not to cover the same is actionable. Your insurance company may offer you a lower figure than it cost to repair your vehicle. Insurers are not allowed to do this, and they are not playing fair. You can seek redress from an arbitrator.

Where the claim is total loss, it is right for you to ask for cash in lieu to save your car especially if it’s an older model you would not like to lose.

You can then repair it at your own time and cost. The insurer is also not held liable for the repairs carried out.

Washington Ndegea, Chairman, Bima Intermediaries Association of Kenya (BIAK).