Car Insurance 101: A Crash Course

DirectAsia.com

16 Jul 2011

Introduction to car insurance

Car insurance is compulsory for all vehicle owners in Singapore. A good motor insurance policy protects you against the following events:

  • Accidents
  • Damage
  • Theft
  • Someone else damaging your car
  • Injuring another person in a car accident
  • Damage due to fires, floods and other natural disasters
  • Legal liabilities in the event of a car accident and third party injuries
  • Car accidents where someone else’s property is damaged

Comprehensive coverage

It is advisable to get a type of motor insurance plan known as comprehensive coverage. This type of insurance covers most of the scenarios listed above.

If you take out a car loan, financial companies generally require you to obtain comprehensive insurance protection.

Many auto insurance plans can be enhanced with optional benefits and extras to suit your own individual needs. Of course, they will have an effect on the premium that you will have to pay.

Motor insurance premiums

Insurance providers have a list of factors that help them determine your insurance premium. This list includes:

Type of car – model type, engine capacity and type, year of manufacture and vehicle scheme

Driver profile – age, gender, marital status, driving record and experience, job type and claims history

4 Essential car insurance terms

The jargon associated with car insurance may look daunting at first. But it is really quite simple to understand.

Here is a list of 4 basic terms that you should know before you begin your research on which car insurance policy to buy.

1. Deductible (or excess amount)

This is the sum of money that you are required to cover if you make an insurance claim.

To illustrate, if your deductible is S$250 and you are insured for S$1000, then you will have to pay S$250 while the remaining S$750 will be paid out by the insurance company.

Some insurance companies levy a deductible that varies depending on the driver’s characteristics. Others provide the choice of higher deductibles in exchange for lower premiums.

2. No Claim Discount (NCD)

A No Claim Discount is like a reward for policyholders who have not made any insurance claims during their policy year. A claim-free year usually gets the insured person a 10% NCD. This lowers the car insurance premium that has to be paid for the following year.

You can accumulate an additional 10% No Claim Discount in this manner every year up to a maximum of 50%. However, if you make a claim while you are enjoying NCD, then the next time your policy is renewed, the NCD that you are awarded will be lower.

3. Offence Free Discount

This is an additional 5% discount that you receive over and above your NCD if you have maintained a clean driving record for three consecutive years.

To qualify for an Offence Free Discount, your record should be free from traffic violations and demerit points for this period of time.

4. Repair options (or repair restrictions)

This term refers to an insurance benefit where you can have your car repaired at reduced prices at shops approved by the insurance company.

When comparing car insurance or considering a repair option, do check the list of ‘approved shops’ and how much the discount on the repair costs will be.

Now that you have gotten the basics of car insurance, have a look at our handy guide on Choosing the Right Car Insurance Policy.

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Singapore Insurance