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While it is a greatly exciting venture, buying your first car is no small feat in Singapore. Along with the Certificate of Entitlement (COE) and annual maintenance costs, car insurance is a mandatory requirement for all vehicles. A valid insurance policy is required as it covers damages to yourself and/or others in the event of an accident, and there are many factors to consider before choosing one that is suited to your needs. Here are three basic things you should know about car insurance policies in Singapore.
Types of Car Insurance
There are generally two kinds of car insurance – third party or comprehensive. Third party insurance is the most basic level of coverage you could get, and it only covers damage to the other party’s property or injury to the other party. Even though this is the minimum requirement imposed by regulators, it is not advisable as damages to you are not covered at all. If you are ever in a serious accident, you will not be able to make any claims for your own property or injuries.
The second type is comprehensive car insurance. As its name suggests, comprehensive insurance covers both the damage to third parties as well as yourself. Personal accident coverage and medical benefits after an accident are included and can be extremely helpful if the accident you are involved in has resulted in injuries. It usually also covers unpredictable occurrences like fire damage and theft along with optional benefits which may incur further premiums (windscreen damage, floods, riots, etc.).
Factors Affecting your Car Insurance Premium
Many insurers in Singapore use a “risk factor rating system” to calculate the premium you are entitled to pay. There are many factors that are taken into account, but they can generally be broken down into two sections:
1. Car-related factors
Details about the car are the first thing insurers look at, and include the make and model of the vehicle, engine capacity, and vehicle age. These factors are important because the type of car you have may require your insurer to absorb higher costs if you get into an accident. Let’s take for example a common sedan like a Toyota compared to a specialty car like a Jeep Wrangler. The engine capacity of the latter alone would cause it to be assigned a higher premium, but if there is an accident, it is also harder to procure the right spare parts, as it is less commonly available than the Toyota.
2. Driver-related factors
The driver of the car is equally (if not more important) than the kind of car that is being covered. Based on previous statistics, insurance companies are able to make accurate guesses about how risky your particular profile will be to the company. The driver’s age, sex, and occupation along with their years of driving experience are some factors that are often taken into account when quoting a premium. A young male driver who is in his early 20s with only a year of experience would probably be quoted a much higher premium than a woman in her late 20s who has more than four years of driving experience.
It is important to note that while all of these things are important to insurance companies, not all of the factors have equal weightage when it comes to the final premium. There are also a number of riders or additional benefits that you could choose to add to your policy, which will result in a higher premium. These should be taken on a case-by-case basis depending on your individual needs.
Making a Claim
Widely seen as the most complicated part of having any sort of insurance, how to make a claim once you have been in an accident can vary between different companies. Most companies would require a police report as part of your claim if there were any injuries before directing you to an approved workshop for repairs. Beyond this process, the most important element to consider when making a claim is how it affects your No-Claim Discount (NCD).
The NCD reduces your premium for the next year if no claims have been made for the year before. It increases 10% for every year that you do not make a claim, up to a maximum of 50%. So if you do not make a claim during your first year (2017), you are entitled to a 10% discount on your premium when you renew your policy the next year (2018). On the contrary, your NCD will be reduced if you make a claim, and the amount varies depending on the discount you already have.
With these basics in mind, new (or potential) car owners will hopefully have a good understanding of how car insurance works in the Singapore context. Drivers should carefully consider their priorities when it comes to their policy and do sufficient research before settling on a suitable one.