Car Insurance Explained – A Beginner’s Guide
Purchased your first car and now you are thinking about getting car insurance? No doubt auto insurance is complex especially when you are not sure about the type of coverage you need. Have no fear, this guide explains everything about auto insurance in Singapore.
The Basics of Car Insurance
Before we go deep into what car insurance is, let’s get familiar with some car insurance terms:
Excess is the first part of the financial damage in the event of an accident, where you as the car owner are responsible. The insurer covers the rest of the sum.
Let’s say you bump into another car and break down the taillights. You are asked to pay $1,200 for the damage. If your excess is $200, your insurance company will cover the remaining $1,000. If you choose a higher excess, this reduces the premium.
No-Claim Discount (NCD)
Small car accidents are inevitable. But if you have a clean driving record, the insurer might offer you a discount on the premium over time. This is called a no-claim discount.
How Much Does Insurance Cost?
After buying a car, there comes another expense, buying the insurance. But how much does car insurance cost? There is no fixed base rate. The premium varies from person to person depending on the following factors:
Those who are under 27 years of age may have to pay a higher excess. If you are at least 3 years of driving experience, you can enjoy a lower premium.
Married individuals with children are usually cautious when it comes to driving. Hence, their premium costs less than that of a single individual.
Driving Experience and Claims
Drivers without a history of accidents, demerit points, or claims are usually granted a lower premium.
Car’s Age and Model
A basic car is charged a lower premium and luxury cars have a higher premium.
Types of Car Insurance In Singapore
When purchasing insurance for your car, it’s important to understand what options are available to you. Some coverages are for you, passengers, your vehicle whereas others are for protecting you in case of injury or damage.
There are three main motor insurance coverage – comprehensive, TPFT, and TPO. Here is a thorough explanation of these:
Third-Party Only (TPO)
It is one of these insurance policies that offer the least coverage. It is also the cheapest. This policy comes in hand in situations where you are responsible for an accident, third-party property damages, or injuries.
The third-party liabilities also include damage to property as a result of the accident which includes trees, the vehicle itself, lamp posts, and other medical or hospital expenses resulting from injuries caused by the accident. Loss of use and wages are included as well.
TPO is ideal for vintage cars. This may be the only coverage offered by insurers. Keep in mind, this coverage does not protect you and damages to your car.
Third Party, Fire & Theft (TPFT)
It covers the third-party liabilities under TOP and over events such as fire or theft. This insurance policy is for those who drive outside of Singapore frequently for covering theft.
Like TPO, this policy doesn’t protect the driver.
As the name implies, it’s the most comprehensive policy out there. It covers everything under TPO and TPFT and provides protection to the car. The coverage includes damages to the body, windscreen, and roof of the car.
This plan pays no more than the market value of the damages. If you have taken a car loan Singapore, the bank makes it mandatory to buy comprehensive car insurance. Since banks have to protect their assets, and they still have the ownership of the car until the loan is paid in full amount, the car is kind of their asset. This is one reason why some cars are expensive. They are on bank loans and are covered under the comprehensive insurance policy.
Although it’s the most comprehensive coverage out there, some plans might not include medical or personal accident coverage. Make sure you thoroughly check the coverage before signing the contract.
Which Insurance Plan to Buy?
This is a tough question that requires a lot of thought. Each plan has a different level of coverage and is priced accordingly. The most expensive plan of course is the coverage plan followed by TPFT and TPO. Make the decision depending on your circumstances.
If you have a new car and it is financed via car loan, then you have no choice but to go with the comprehensive insurance plan. This plan is going to protect you and the other party in the case of damage. Let’s say you end up totaling your car by causing an accident. This insurance plan will pay for the cost of repair and replacement. Some optional features are included in the comprehensive policy. You may add these features, customize the plan and make it fit your preferences.
If it’s an older car (over 8 to 10 years), then TPO or TPFT make sense. While your car’s market value could be low due to its age, the premium won’t change. Getting a comprehensive plan for an old vehicle does not make much sense. You will be paying hundreds of dollars in premium to protect a vehicle that doesn’t have much worth, to begin with.
Tips to Consider Before Buying Car Insurance
It’s tricky to buy insurance in Singapore. Before committing to a policy, here are some things you must consider. With these tips, you should be able to choose a policy that offers enough protection and coverage and doesn’t hurt your wallet at the same time. Without further ado, let’s begin
Type of Coverage
We know now that there are three types of auto insurance in Singapore. Before you decide to skip insurance altogether, you must know that under the Singapore road and safety act, it is mandatory to have at least the TPO insurance policy. It is the most basic policy that covers the cost associated with damages caused by you to someone else’s car including the medical expense.
If you want slightly more coverage i.e. coverage to losses because of fire or theft, then TPFT is for you. Comprehensive insurance is a well-rounded plan covering everything – third party, fire, theft and losses, and damages to the vehicle, its belongings, passengers, and the driver.
While settling for a plan, don’t forget that the more coverage you get, the more expensive your premium.
This is a deductible, which is a sum of money that the insured driver must pay to the insurance company upon making a claim.
Let’s say the driver has a policy excess of $500 and the repairs cost $5000. He will be responsible for paying $500 while the rest of the $4,500 will be paid by the insurance company. The purpose of policy excess is to ensure that the insured person drives carefully on the road. In this way, the driver doesn’t make unnecessary claims.
Some companies wave off the policy excess but this often results in a higher premium.
Coverage in Malaysia
If you travel to Malaysia often, then you might want an insurance policy that offers coverage as well as roadside assistance. Some insurance policies offer international coverage as well.
This type of coverage is not normally included in the main policy. It must be topped for enhancing your current coverage. Before traveling, make sure your insurance plan offers protection outside of Singapore.
Replacement Car or Courtesy
At times, you get into an accident with your brand new car. Some insurance companies are willing to replace your car with a brand new one if the damages are beyond repair. In case the car is eligible for replacement, the same make and model must be chosen for replacement.
If the vehicle is not severely damaged, the insurance company might offer a courtesy vehicle until your car is repaired.
In case neither are offered, at the very least a stipend must be offered to cover the daily cost of transport until the car is fixed. Usually, this amount is $50 a day.
No-Claim Discount & Premium Rebates
No claim discount (NCD) is for those drivers who haven’t made any claims for a consecutive years. Every year you go without making a claim, you get 10 percent discount whenever the policy renews. The maximum discount available is 50%. So if you go 5 years without filing a claim, the insurance premium will cut in half. No wonder it’s advised to drive safely.
Apart from NCD, insurance companies offer premium rebates as well whenever the driver meets certain conditions during the policy terms. This includes installation of an in-car camera or choosing preferred workshops set by the insurer.
Rebates like these will help you lower the premium on your vehicle.
Some FAQs About Car Insurance
Check out these frequently asked questions about auto insurance so that you are on the right page.
What does auto insurance cover?
The purpose of auto insurance is to protect the person against financial damages as well as losses arising from a motor accident like the cost of repairing the vehicle. This insurance provides the driver and passenger with coverage for medical expenses, lost or damaged items, and even death.
It also covers accidental damages caused by the driver to the third party’s property. You might as well enjoy fringe benefits which include 24/7 emergency assistance or daily transport allowance while your car is getting repaired in the workshop.
Why do you need auto insurance?
Car insurance is compulsory for anyone who owns a car. If you are driving without insurance, you may end up paying up to $1,000 in fine or a jail term of up to three months. You could also be disqualified for holding or getting a driver’s license for 12 months.
Putting legal implications aside, car insurance is for the protection of you and your loved ones as well as third parties from all kinds of financial repercussions of an accident.
How do you compare insurance?
In order to compare car insurance, you must start by checking the details of the policy coverage. The important sections to include coverage for are medical expenses, personal accident coverage, liability to the third party, vehicle damage, etc.
Do factor in the cost particularly if you are on a budget. Do your research, compare different car insurance policies out there and get an instant quote from different providers. Remember to read that fine print to understand the terms and conditions of the policy and then make an informed decision.
- Car insurance in Singapore are of three types: Third Party Only, Third Party Only, Fire & Theft, and Comprehensive Plan
- Not having car insurance can land you in legal trouble and a hefty fine.
- The plan you choose depends on the coverage you need. TPO is for old cars and it’s the least coverage one can have.
- TPOFT offers one level higher coverage whereas a Comprehensive plan as the name implies offers comprehensive coverage.
- To choose the right insurance plan, do consider policy excess, no-claim discount, and other factors to make the right decision.
Because car insurance is mandatory for any driver in Singapore, most buyers don’t know where to begin with in order to make the right decision. If that’s you, educate yourself by learning about the three types of car insurance available in the country, which include Third Party Only, Third Party Only, Fire & Theft, and Comprehensive Plan.
If you are the type of driver who is extra cautious on the road, down the road, you should be able to avail discount on the insurance premium. And if you make no claims at all, and maintain a clean record, then you should be able to avail the NCDs.
There is no way you can escape auto insurance. So might as well dive into this guide and take all the help you need to understand which insurance plan is right for you. if you are looking for a new or used car and need help with financing and insurance, do check out Cars N U.
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