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Car insurance is a contract between you and your chosen insurance company. This contract protects you against financial losses in the unfortunate event of an accident or theft.
Car insurance works in the same way as any other type of insurance does – you pay a premium to your insurance company for an assurance of compensation for a specified set of losses. Should anything unfortunate happen on the road, losses generally occur to one of four things: you, your car, a third party, and his/her car. Touch wood!
To break this down further, car insurance basically provides protection for:
Even if you consider yourself a safe driver, others may not be. Considering the constant threat of danger on the road, it is not surprising that car insurance is compulsory if you want to drive a car in Singapore.
Take note! This applies to all types of vehicles. No matter what vehicle you operate, you are legally required to purchase motor insurance to utilise your vehicle on public roads.
As mandated by the government, your motor insurance must at least cover third-party related financial losses incurred from accidents. This includes damage or death of, or bodily injury to, any person arising out of the use of that vehicle on the road. This is the most basic coverage required.
Moreover, a vehicle is a big-ticket expense that you want to protect, and that’s why we highly recommend that you get car insurance. It’s a necessity that can help pay for repairs to your vehicle after an accident, depending on what kind of coverage you select. Like other types of insurance, getting the cheapest car insurance should not be the only priority for car owners. You'll need to think about how easy claims can be processed and how much actual coverage you're getting for the amount you pay.
Type of car insurance plans
Third-Party Only (TPO)
Third-Party, Fire & Theft (TPFT)
Types of Car Insurance and Recommendations
There are a few major car insurance providers in Singapore. The more popular ones are:
Young & Inexperienced Drivers
Late 20s & Older
Highly Dependent On Car
Peace Of Mind During Accidents
(insures drivers up to 80 years old)
For drivers with prior accident records
(For drivers who've had multiple accidents)
Best Car Insurance Comparison
Now that you have internalised the basics, there is just one final segment to complete your car insurance 101 manual: car insurance premiums.
Your quoted premium is calculated based on the concept of “risk”, that is, how likely you are to get into an accident. Insurers use numerous factors to determine your risk. Hence, the higher your risks, the higher the price of your car insurance premium and vice versa.
These are the factors used to assess your risk profile, which ultimately determines your premium:
Some companies deem women safer driver than men
Job / Occupation
Make and model of Car
Off-peak drivers can receive lower premiums as their time spent on the road reduces their probability of accidents
Criteria for Calculating Car Insurance Premiums
Car insurance premiums are generally paid annually or once every six months.
Car Insurance excess refers to the amount you have to pay before your insurance provider forks out any money for you. For example, if the repair cost for your damaged vehicle is $1,000 and your excess to be paid is S$300, your insurer will then pay for the remaining S$700.
Car insurance excess is a way of affording some responsibility back to drivers to reduce the number of small claims. This is essentially an attempt to keep premiums lower.
Car insurance policies are generally customisable in that you can lower your premiums by increasing your excess. Just remember, the higher your excess, the lower your premium.
There is a price to pay for our youth when it comes to car insurance excess. This is because you will be quoted higher excess. Drivers below 25 years old with less than two years of driving experience are deemed young and inexperienced in the eyes of insurers. Note that criteria may vary across insurers!
While low premiums are incredibly attractive, you might want to be careful if you're opting to pay a very low premium because you might have to pay a large sum of excess in an accident. When deciding on excess, it is advisable to set it at an amount that you can afford to pay out of pocket in an accident.
The No Claims Discount (NCD) is an initiative to incentivise safe driving. NCD is rewarded by your insurance provider if no claims have been made under your policy for a year or more with the current/existing insurer.
The longer you maintain your claim-free record, the higher your NCD, and the more discount you are eligible for.
Your NCD entitles you to get a discount on your premium the following year. The NCD discount is as follows:
Duration with no claims
1 year, NCD 10
2 consecutive years, NCD 20
3 consecutive years, NCD 30
4 consecutive years, NCD 40
5 consecutive years or more, NCD 50
Your NCD level and eligible discount goes according to the number of consecutive years you do not make any claims
This depends on whether you, the insured driver, were at fault.
In cases where you are found to be at fault, your NCD will be reduced and the amount of NCD penalised can vary from insurer to insurer. But generally, this would be how most companies structure their NCD: :
NCD after 1 claim made
NCD after 2 claims made
30% and below,
NCD30 and below
No Claims Discount (NCD) Rates After Making Claims
As you can see, usually, when you make an "at-fault" claim, your NCD usually drops by 30%. However, some insurance providers like AVIVA have lower NCD penalties and may only deduct your NCD by only 10%.
Almost all insurance providers will allow you to purchase an add-on known as an NCD Protector, which protects your NCD, usually has to be NCD30 and above, from reducing in the event of a single claim.
When choosing your car insurance, there are several important factors to consider. While they often differ depending on your needs and priorities, here are some factors to remember before purchasing a suitable and cheap car insurance:
With almost everything available online, you can also get your car insurance sorted with a few clicks today. Here are the details you will usually need to get a quote for your car insurance:
Have burning questions? Head over to Seedly to share your questions or hear what our community of personal finance enthusiasts, experts, and experienced professionals have to say!
Understanding car insurance can feel like a tall order with so many components to consider. Here are several car insurance guides to help you grasp all you need to know about car insurance:
There are three types of car insurance plans: Third Party Only (TPO), Third Party, Fire and Theft (TPFT), Comprehensive coverage. The type and extent of coverage you require is a personal decision that you need to make. TPO car insurance is the most basic car insurance that only covers damages done to a third party. On the other hand, comprehensive car insurance provides extensive coverage albeit at a higher premium. It is recommended to purchase an insurance plan that provides wider coverage, depending on your car's value, make, and age.
Car insurance providers calculate your annual premiums based on considerations that estimate your risk or likelihood of making a claim. As some of these factors, such as age and gender, you cannot change, it may be good to get quotes from several insurance companies and choose the most affordable one for you. However, do note that cheap premiums may often mean higher excess. Also, the last thing you'd want to do is to compromise on coverage for cheap premiums!
Yes, the choice of the workshop for car repairs matters. Insurance companies generally prefer that you choose from their list of authorised workshops. However, most car insurance providers will allow you to top up an extra to service your car at the workshop of your choice.
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