Yay! You’ve just successfully purchased a car and you can’t wait to bust it out on the roads to drive it. Now you just need to get that mandatory annual car insurance. If you bought a new car, you probably don’t have a choice of insurer, and have to go with whichever insurer your car dealer
forces strongly encourages you to sign up with.
Well okay, that’s fine so long as it’s affordable. A lot of Singaporeans don’t care much for car insurance other than how cheap it can get every year, but this can lead to problems and disappointment should you ever need to make a claim.
Buying or renewing car insurance for the first time? Here’s what you are actually paying for and why you need to pay attention.
1. Car Insurance Annual Premium
The annual premium of a policy is basically what you pay every year to be covered. Your premium depends on the company you go with, of course, but also what is known as the Risk Factor Rating System. Insurance companies determine how likely you are to get into an accident based on factors like your age, your gender, your driving experience, and so on. The more accident-prone you are, the higher your premium. Because you’re a ticking time-bomb, essentially.
That said, you want to be careful with premiums that are TOO affordable. Companies usually have some sort of trump card in their terms and conditions to make up for the low premium. As the saying goes, “something’s gotta give”. The good news is you get a reward (well I consider it one anyway) for being a nice boy on our roads.
For each year that you’ve not made an accident claim, you can get a 10% to 50% discount (called a No-Claim Discount or NCD for short) off your premium! So you don’t have to pay as much.
You also get an optional add-on called an NCD protector. This allows you to keep your discount in case you suay suay really kena accident after 5 years without one. We definitely recommend you get one if you can afford it.
This is the amount of money YOU need pay out of your own pocket if you want to make a claim for the rest of the cost. Look honey, everything has consequences. Insurance companies will go up in smoke if all accidents are fully claimable. The roads will become a bumper car playground.
They need something to motivate you to drive less recklessly DESPITE being insured. Different sections of the dreaded terms and conditions will indicate if the excess applies solely to your own damaged vehicle or if it also applies to third party damages.
This excess is inversely related to your premium. Meaning the higher your excess, the lower your premium. Which may or may not be a good thing. Because even though you save on your premiums, you pay higher if you have an accident. Something’s gotta give…
3. Named Driver Excess
Basically point 2 except it’s for additional drivers that you choose to list down on your policy.
This distinction matters because adding multiple named drivers on your policy may increase your premiums. However, what you’re doing is saving yourself from paying more excess should they be behind the wheel in an accident.
If these drivers are young and inexperienced, your premiums are going to go up. These factors increase the risk of your car getting into an accident, which means the insurance company will expect to spend more money reimbursing your claim. Such insecure people, these insurance companies.
I personally wouldn’t add too many drivers unless they’re very regular users of my car. This way I pay less premiums and just resort to paying more excess in the event an unnamed driver really gets into an accident. Because what are the chances of that?
4. Comprehensive vs Third Party
Their names make them sound so complicated, but it’s actually rather simple. The type of car insurance policy you get matters as it determines what is covered. Comprehensive Coverage policies usually have the broadest coverage, excluding only damages caused by civil riots, natural disasters, and nuclear terrorism. Third Party policies provide lesser coverage, but have lower premiums and will usually cover only the other parties’ costs and not your own.
If your car is 8 years old and fully paid, you can opt to switch to a Third Party policy. Cars below 10 years of age and still under hire purchase will have no option to switch usually.
If you are driving a COE car (i.e. one that’s over 10 years old), consider Third Party insurance to save on your premiums. After all, you might choose to scrap your car if it gets into an accident, rather than repair it.
5. Authorised vs any workshop
Each insurance company will have their own lists of “authorised” workshops you can do your repairs with. Check if the insurance policy only allows you to select from these particular lists or if you are also able to choose workshops that are not on that list.
Some insurance companies give you the optional benefit of going to your preferred workshop. Not surprisingly, this flexibility often comes with a price. It might be worthwhile to go with an insurer that has an extensive list of authorised workshops.
Alternatively, check to see if your favourite workshop is on any insurance company’s list. That way, you get the best of both worlds.
6. Loss of use benefits
In the event you’ve managed to actually kill your car off or your car’s stuck at the workshop, your insurance company can give you a form of benefit to tide you over your vehicle-less existence.
Check if the insurance policy provides a replacement car during those days your car is being repaired. Also check how many days are you allowed use of the replacement vehicle.
Alternatively, some insurance policies provide a transport allowance instead. These benefits are significant as it affects your lifestyle when you’re recovering from a major accident.
7. Terms and Conditions
You know how we’re always advised to read the fine print before we sign on the dotted line? Yes, this is one of those big decisions where we shouldn’t just tick the “I accept the terms and conditions” box so readily and call it a day. As with all the aforementioned points, you should read the rest of the terms and conditions to see what is covered, as well as special conditions that exclude or penalise you from claiming in the event of an accident.
A good example would be the topic of car modifications. While some have speculated that LTA-approved modifications will not affect car insurance policies, there are cases where insurance companies have cancelled a driver’s plans simply for modifying his car from the manufacturer’s standard specifications, DESPITE THEM BEING APPROVED BY THE LTA.
Moral of the story? Your wife was right when she said car modifications are a waste of money.