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Essentials Of Car Insurance

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When it’s time to renew your car insurance, you may gloss over policy terms in search of the best deals available, but it’s helpful to have basic knowledge of the essentials to facilitate your search.

Shopping for a car is, to most people in the market for such an item, a pleasurable experience. The excitement dies a little, however, when one realises the other expenses that come with owning a car!

One such expense is the car insurance, which is compulsory in Singapore. Unlike car shopping, where you can get easy comparisons in terms of price and options, the world of car insurance is a little complicate — it comes with a mouthful of jargon and multitude of conditions and options, sometimes on a case-by-case basis instead of being applicable across the board.

There are three types of car insurance plans:

  • Third Party Only (TPO);
  • Third Party, Fire and Theft (TPFT); and
  • Comprehensive Car Insurance.

The TPO is the minimum plan requirement in Singapore. It’s the least expensive because it only covers damages to other people’s cars in the event of an accident but not, unfortunately, any damages to your own car. Do note that TPO is only paid if it’s proven that the accident was not your fault. TPFT provides additional coverage by including damages to your car due to fire, theft and even vandalism. The most expensive is the Comprehensive Car Insurance, and that’s because it covers anything that happens to your car and any other parties involved. Do note that some banks offering car loans require you to take this plan in order to approve your loan. And if you’re buying a car that’s more than 10 years old, this plan is not an option.

There are three insurance terms that frequently appear in car insurance policies.

The first is Excess. This refers to the fixed sum you have to fork out for damages before the insurer covers the rest. This amount is adjustable, depending on your budget. If you opt for a higher excess, you pay less in premiums but you may put yourself at risk of a painful pay out from your own pocket in the event of an accident. A lower excess covers you more but also means the premiums you need to pay will be higher.

No-Claim Discount (NCD) is an incentive for drivers to stay safe and avoid getting into accidents. If you’ve managed to stay free from any insurance-affecting accidents and made no insurance claim, you earn a 10% discount on your next insurance premium for each no-claim year up to a maximum of 50%. So if you make it to the sixth year without having claimed any insurance, you stand to have the following year’s insurance premium at half the cost!

These days it is common for a private car to be shared between different members of the family. In such situations, it makes financial sense to add these additional drivers in the car insurance policy. These additional drivers are termed Named Drivers in the policy. They are recognised by the insurer as the other approved drivers of the same car, and are covered by the main owner’s car insurance policy, sharing the same protection and privileges as agreed under the policy’s terms. Some insurers allow up to five named drivers for free, on the condition that they are not below 25 years old and have at least two years of driving experience.

To make an effective claim that ensures on-time pay out, don’t delay submitting a proper claim. Do it as soon as possible and within 24 hours from the time of the accident or by the next working day. Your claims may be voided if you do it after that window period.

Avoid negotiating or making a private settlement with the other party. What this shows is you admitting liability even if the other party is in the wrong.

Gathering evidence — like car camera footage of the accident — will be of great help to back your case. If your car doesn’t have a dash cam installed, use your smartphone to get varying shots of the accident site and involved parties — you may wish to do this even if there is video evidence available.

Lastly, make sure to only visit car workshops authorised by your insurer. This will help smoothen the claims process.

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