As a car owner in Singapore, having car insurance is a legal requirement but it is also essential for your overall peace of mind. Besides the costs of vehicle repairs, there could be potential medical expenses to consider in the event of an accident.
Given the many insurers out there, it can be a challenging task finding the right one if you are buying car insurance for the first time or looking to switch to another insurer. This is an easy guide to help you understand the usual process, terminology and key things to look out for when it comes to car insurance in Singapore.
How does car insurance work?
Here is a general overview of the steps involved when it comes to car insurance in Singapore:
1. Policy purchase: You select a car insurance policy from an insurer that meets your coverage needs and budget.
2. Premium payment: You pay the agreed-upon premium, either upfront or in installments, to maintain your policy’s validity.
3. Claims process: If you are involved in an accident or your vehicle sustains damage covered by your policy, you can initiate a claim with your insurer.
4. Claims assessment: The insurance company will assess the validity of your claim and the extent of the damages or liabilities.
5. Claims settlement: If your claim is approved, the insurer will provide compensation or cover the costs of repairs, replacements, or liabilities, as per the terms of your policy.
Take time to carefully review your policy documents and understand the claims process, as well as any exclusions or limitations, to ensure a smooth and efficient claims experience.
Key terms in car insurance policy
Your car insurance policy is a legally binding contracts between you and the insurer. Make sure that you fully understand the terms and conditions outlined in your policy as well as your rights, responsibilities, and the scope of coverage.
1. Policy Schedule:
This document outlines the specific details of your coverage, including the insured parties, the vehicle covered, the policy period, and the coverage limits.
2. Policy Wording:
This section defines the terms, conditions, exclusions, and limitations of your policy. It outlines what is covered and what is not covered by your insurance.
3. Excess (or Deductible):
Think of excess as a sort of co-payment. If you are at fault in a road accident, you need to pay an excess when you make a claim on your insurance. This is the fixed amount that you must pay out-of-pocket, with the insurer covering the remaining costs – up to the policy’s limit – of a claim.
Most insurers will offer a standard excess policy, but you can choose a higher or lower excess depending on your risk profile and financial situation.
High excess: Your insurance premiums will be lower as you will pay more from your own pocket. Safe drivers who have a clean driving record for a long time may decide on a high excess policy as their likelihood of getting into an accident is low. Other drivers may choose a higher excess to manage their ongoing expenses due to their financial situation.
Low Excess: Your insurance premiums will likely be higher, but your out-of-pocket will be lower when you make a claim. If you prefer greater peace of mind or can afford higher premiums, a lower excess might be the preferred choice.
4. No Claim Discount (NCD):
Insurance companies in Singapore offer a No Claim Discount (NCD) on car insurance premiums as an incentive for drivers who maintain a long-term claims-free record.
For each year that you do not make a claim under your policy, you get a 10% discount on your premium upon renewal, up to a maximum of 5 years. This means you could earn an NCD of up to 50% off.
The NCD may be different for private cars versus commercial vehicles. As with any insurance policy, it is better to check and clarify with the insurer directly.
5. Renewal and Cancellation Terms:
These state the procedures and conditions for renewing or cancelling your car insurance policy.
6. Claims Procedures:
This section of your policy outlines the steps you need to follow to file a claim and the documentation required.
Types of car insurance coverage in Singapore
In Singapore, car insurance policies typically offer a range of coverage options to cater to your specific needs. These include:
- Third-Party Only (TPO) Coverage
- Third-Party, Fire, and Theft (TPFT) Coverage
- Comprehensive Coverage
Each type of coverage varies in terms of the protection it provides, with comprehensive coverage offering the most extensive coverage against a wide range of risks, including accidental damage, theft, and third-party liability.
Third-Party Only (TPO) Coverage:
Under the Motor Vehicles (Third-Party Risks and Compensation) Act, it is compulsory for all car owners in Singapore to have at least a Third-Party Only (TPO) insurance policy.
This basic level of coverage protects you from legal liabilities arising from bodily injury or death to third parties, as well as damage to third-party property, in the event of an accident caused by your vehicle.
Failure to comply with this legal requirement can result in severe penalties, including fines and potential imprisonment. It is crucial to always maintain a valid car insurance policy to avoid legal consequences and ensure your financial protection.
While TPO coverage is mandatory, car owners in Singapore have the option to enhance their protection by purchasing additional coverage. Some popular optional coverage options include:
Third-Party, Fire, and Theft (TPFT) Coverage:
In addition to the benefits of TPO coverage, TPFT policies cover losses or damages to your vehicle caused by fire or theft.
Comprehensive Coverage:
This provides the most extensive protection, covering not only third-party liabilities but also accidental damage to your vehicle, as well as losses due to fire, theft, and natural disasters.
Other add-ons:
No Claim Discount (NCD) Protector:
Your NCD can be affected if you file a claim and are found to be the one at fault in an accident. Some car insurers offer this protection to help you maintain your NCD, on a complimentary basis or as an add-on, ensuring that your premiums do not increase.
Excess Waiver / Protection:
By adding this coverage, you can avoid paying the excess in the event of a claim, reducing your out-of-pocket expenses. You will still need to pay the excess initially but can get it back under your excess insurance policy.
What will affect your car insurance premiums?
Several factors influence the cost of car insurance premiums in Singapore, other than the price you have paid for your vehicle. In general, these are what insurance companies look at:
1. Your Age and Driving Experience:
Younger than 25 years old or older than 65? Just got your driving licence? Generally, such drivers are considered higher risk by insurance companies and therefore pay higher premiums.
2. Vehicle Age, Make and Model:
Newer, high-performance vehicles or luxury cars attract higher premiums compared to standard models. This is mainly to account for their higher repair or parts replacement costs.
3. Your Claims History:
Drivers with a history of accidents or frequent claims will be considered a higher risk and thus be charged higher premiums.
4. No Claim Discount (NCD):
The NCD increases by 10% for every claim-free year, up to a maximum of 5 years. This can reduce your car insurance premium significantly as your NCD can be up to 50%.
5. Level of coverage:
Comprehensive coverage policies will naturally be more expensive than your basic TPO or TPFT policies due to the increased level of protection.
6. Usage of Vehicle:
Cars used for personal commuting generally have lower premiums compared to vehicles used for business or commercial activities.
>>READ: What affects your car insurance premiums?
Tips for choosing the right car insurance
With so many car insurance providers and policies available in Singapore, selecting the right coverage can be a challenging task. Here are some tips to help you decide:
1. Assess your needs:
Look at your specific requirements, such as the value of your car, your driving habits, and your financial situation, to determine the level of coverage you need.
2. Compare quotes:
Obtain quotes from various insurers and compare the coverage, premiums, and terms and conditions to find the most suitable and cost-effective option for you.
3. Consider additional coverage:
Explore coverage options, such as excess waiver, and NCD protector, to enhance your protection and peace of mind.
4. Review policy documents:
Take time to read and understand the policy wording, exclusions, and limitations to ensure you are fully aware of what is and what is not covered.
5. Research the insurer:
Check with your car owner friends, and research the car insurer’s reputation, customer service, and claims handling process. This helps to ensure a smooth and efficient experience in case you need to file a claim.
6. Check for bundling discounts:
Many insurance companies offer discounts when you bundle multiple insurance products, such as car and home insurance, with them.
Car insurance claims process
Every car owner would hope for a safe and incident-free driving experience. But in the unfortunate event of an accident, these are some key steps to take for the claims process:
1. Notify your insurer:
As soon as possible after the incident, inform your insurance company about the details of the event and your intention to file a claim.
2. Gather documentation:
Collect all relevant documentation, such as police reports, witness statements, photographs, and repair estimates, to support your claim.
3. Submit your claim:
Complete and submit the claim form provided by your insurer, along with the required documentation.
4. Claims assessment:
The insurance company will assess the validity of your claim and the extent of the damages or liabilities covered under your policy.
5. Claims settlement:
If your claim is approved and as per the terms of your policy, the insurer will provide the compensation or cover the costs of repairs, replacements or liabilities.
At the end of the day, follow the claims procedures outlined in your policy and cooperate fully with the insurance company’s investigation to ensure a smooth and efficient resolution.
Car insurance: A crucial part of being a car owner
Having car insurance is part and parcel of being a responsible car owner. When it comes to choosing the coverage policy, you need to start by assessing your own driving and financial profiles. Always carefully review the policy you have been offered to make sure that your coverage needs are adequately addressed without unnecessary costs. Remember that having the right car insurance not only ensures that you are legally protected, it also safeguards your financial well-being and gives you greater peace of mind.
