What To Consider When Choosing Car Insurance
Retail therapy is super fun... unless you’re shopping for car insurance. It’s more like a chore, and no one likes doing that, especially when there are so many options out there. It doesn’t help that there aren’t fixed prices for insurance––they’re calculated on a case-by-case basis and typically quoted to you in person by the insurer, so you’re often left guessing while you do your research.
That being said, it’s still important to get the basics down, so you don’t get shortchanged when it comes to shopping for car insurance! Here’s the absolute minimum you should know before picking a plan.
Excess vs. Premiums
Two words that’ll crop up in your insurance shopping: excess and premium.
Excess––also known as a deductible––is the money the driver pays out of pocket when an insurance claim is made. Excesses basically exist to prevent drivers from making insurance claims for every little thing. For example, if the excess on your policy is $200, and ram your car into a tree for damage costs of $2000, you only have to pay $200, and the insurance company will cover the rest.
Premiums are the cost of your car insurance plan. That’s just how much you pay a year (or a month, etc.)
In general, there’s an inverse relationship between the excess and the premium. A cheap excess means you’ll be paying a higher premium––which is usually the safer option––but some people might find cheap premiums attractive if they have an old car, or they think their driving’s pretty good. Bear in mind that cheap premiums are often accompanied by T&Cs that exclude basically everything, so always read the fine print!
If you’re a young and/or inexperienced driver (typically in your early 20s or with less than 2 years of driving experience), you’ll be subject to an additional excess on top of the standard amount. It won’t come cheap––about $1000 to $2500––but insurers do think drivers in this category are higher-risk as a whole. However, some insurers don’t insist on this, so you’ll want to compare plans to see what suits you best.
What affects your car insurance premium?
Your car insurance premium is determined by two broad groups of factors: those you can’t easily control or change, and those you can control.
Who You Are
Who you are plays a big role in how insurance companies calculate your premium.
Age: The cheapest premiums are available to drivers between age 30 to 65. Insurance tends to be expensive for anyone younger or older.
Sex: This is perhaps unfounded, but some insurers offer cheaper premiums for women out of a belief that they’re ‘safer’ drivers. (Nice work if you can get it, we guess!)
Marital status: Are married people more responsible drivers? We don’t have the stats, but some insurance companies seem to think so. Getting hitched might improve your chances of a lower premium.
Occupation: If your job involves lots of driving––e.g. you’re a salesperson, plumber, electrician, wedding cake delivery person, private tour guide––you’re likely to pay a higher premium, as that implies heavy car usage. But if you have an office job, your premiums are likely to be cheaper.
Driving experience: Experienced drivers get cheaper premiums.
Claims history: The fewer insurance claims you’ve made, the cheaper your premium. Insurers will typically look at your claim history for the last 3 years when deciding your premium.
No Claim Discount (NCD): Not making insurance claims has its perks: every year you drive and don’t make an insurance claim nets you a 10% discount on your insurance––good for up to 5 claim-free years for a 50% discount. And we all love a good discount, amirite?
Certificate of Merit (COM) discount: More incentive to be a good driver––some insurers will offer a 5% discount on your insurance if you went 3 consecutive years without demerit points!
Corolla Hatchback Hybrid (C) ST Auto Group
Naturally, the vehicle you’re insuring is a big factor––and one you can’t really control for:
Make & model: There’s a direct relationship between the cost of your car and the cost of your car insurance––it’s about how easy the car parts will be to replace in the event of an accident. Basic cars are cheap to insure, while luxury cars command more expensive premiums.
Age: Imagine a U-shaped curve measuring price against age––premiums for insurance policies tend to be the most expensive for new cars. Prices fall until the car is about 7–8 years old, and then start to rise a little. (Exact numbers depend on the type of insurance plan you’re on.)
Car usage: People who don’t drive that much pay lower premiums, and vice versa.
You might not be able to change your car or who you are (in the eyes of the insurer, that is), but you can decide whether you want to pay a lower or higher excess. As described above, the overall safer option is to pay a higher premium, which means a lower excess if something happens to your car.
If you have a new car, chances are that the warranty requires you to get any and all repairs done at the dealer’s workshop. Alternatively, you might have a preferred workshop you’ve been going to for years.
However, depending on the exact policy your insurer might insist on a particular ‘authorised’ workshop. If you want control over which workshop you take your car to, make sure you pick an insurance plan that allows for this. If it doesn’t matter which workshop your car ends up at, your insurance premium is likely to be cheaper.
Named Drivers vs. Policy Owner
If you signed the insurance contract, you’re the ‘policy owner’. But, if you live with a significant other or your family, chances are you’re sharing a car with someone else. This can be dicey if they and not you get into an accident.
If you drive your car into a wall, that’s on you and you pay whatever excess you agreed to in the contract (say, $250). But if your son (or cousin, brother, nephew, etc) drove into a wall and their name isn’t on the contract, you’re looking at a much higher excess.
To avoid that sort of problem, add other 'named drivers'––i.e. People who are going to be using your car. Many insurers will allow you to add on a few named drivers for free, as long as they’re experienced drivers. Unfortunately, young or inexperienced drivers are likely to be slapped with higher excesses.
Types of Coverage
There are three broad types of insurance plans:
Third Party Only (TPO): The cheapest kind of insurance going, this only covers damages to other people’s cars (or property, trees, lamp posts, injuries to the other person), not your own! Best for old and/or second hand cars.
Third Party (Fire & Theft): Like the above, plus coverage for events like fire and theft. But you (the driver) won’t be covered under this one, either.
Comprehensive Insurance: As the name suggests, it covers most of your bases––anything that might happen to your car and other people and their cars–– and is correspondingly the most expensive of the three. But this is also the most common kind of insurance in Singapore––yes, the “just in case” mentality might play a factor, but it’s mandatory if you took out a bank loan to buy your car. If you have a new car, definitely get this one.
It’s essential that any car insurance plan covers losses and damages to the vehicle, as well as personal accident and medical fees. That being said, even if you pick up a ‘comprehensive insurance’ plan, it might not always include medical and personal accident coverage. Whichever you decide to go with, it’s always important to read the fine print.