What is Car Insurance

The car insurance industry in Singapore can be quite complex, due to its constantly changing premiums and convoluted vocabulary. Below, we'll guide you through the car insurance basics such as what it is, what it covers and how to get the most out of your car insurance plan.

Table of Contents

• Defining Car Insurance
• Why You Need Car Insurance
• Car Insurance Policy Structure
  • How Premiums are Calculated
  • Notable Exclusions
• How to Pick the Best Car Insurance

Defining Car Insurance

Car insurance is a form of insurance that protects you against medical and liability costs when you get into a car accident. It's divided into three different types of policies: Comprehensive, TPO and Third-Party, Fire & Theft (TPFT). Starting from 1990, Singapore's Road And Safety Act made it mandatory to have at least Third Party Only (TPO) car insurance—the cheapest and most basic plan—which covers for only the costs associated with you damaging someone else's car and their medical costs. Third-Party, Fire & Theft coverage expands on that coverage by adding protection from losses due to accidental fires and theft. With an average cost of S$765, TPFT plans are a bit more expensive than TPO plans, which cost S$624.

Comprehensive coverage is the most common type of car insurance in Singapore and includes not only third party liability and fire/theft, but also covers losses and damages done to your person, vehicle, passengers and belongings. It can also cover other things like loss of keys and provide a courtesy car if your car is in the repair shop or is stolen. Comprehensive plans required for those who are getting a new car with a car loan. Payment for all plans is annual with premiums generally changing every year—although you can find some insurers who will sell you a two-year plan with a locked-in premium. The current average premium for a comprehensive plan is around S$1,593 for an average sedan.

Why You Need Car Insurance

Car insurance is compulsory in Singapore, so regardless of whether you want to or not, you must have car insurance lest you get caught and suffer penalties of fines up to S$1,000 or imprisonment. Besides, having car insurance is a good way to protect yourself from expensive legal fees and medical expenses. Car accidents are more common than most people expect, and making sure you and your passengers are well protected can mean saving big on car repairs, medical costs, lawsuit fees and even damages done to your personal belongings.

Some insurers may even cover for smaller inconveniences, like towing charges and alternative transportation while your car is being repaired. Knowing that someone will be able to help in the event of a car accident or mechanical breakdown can offer a great peace of mind, especially for young or inexperienced drivers.

Car Insurance Policy Structure

Besides offering TPO and Third-Party, Fire & Theft plans, insurers also offer several different options of Comprehensive plans. Differences between the Comprehensive plans include premium price, scope of benefits and maximum amount of coverage offered.

The Comprehensive plan's structure is usually broken down into accidents and repairs, personal accident and liability expenses and optional add-ons. While some may charge extra, other insurers provide coverage for loss of use (temporary travel allowance), windscreen repair, car accessory damage and medical expenses.

Other optional add-ons include No Claim Discount protection, phone assistance and roadside support or personal accident coverage. However, it is important to know you will have to pay a "policy excess" in certain circumstances, meaning you are responsible for a certain amount before your insurer takes over the costs. This is an adjustable amount that may differ due to age or type of claim, but the average excess rate in Singapore ranges between S$600 and S$1,000.

How Premiums are Calculated

Your car insurance premium will be based on several factors, ranging from who you are to the type of car you drive.

Unlike other forms of coverage, your premium will be calculated only after you input all of your information, including your age, gender, occupation, years of driving experience, numbers of claims, marital status and demerit points. This is due to the Risk Factor Rating System insurers use to identify the potential risk level of a driver. Men, young/inexperienced drivers or those older than 65+ and people who have filed claims tend to have higher premiums.

What kind of car you have is also a factor in calculating your premiums. This includes the car make, car model (engine and capacity specifications), car's age and whether or not it is off-peak or on-peak. An off-peak car is a car that is not driven between 7am and 7pm on weekdays (except on Public Holidays) and usually results in cheaper premiums. Luxury, on-peak and high engine capacity cars will yield higher premiums due to their parts and time of use.

If you want to save on your premium, you can get a discount of up to 50% if you meet the criteria for a No Claims Discount (NDC). For each number of years where you did not file a claim for which you were at fault, your discount increases in increments of 10% up to 50%. Some companies also offer a Safe Driver Discount, which can be stacked on top of your NDC.

Notable Exclusions

Some of the main exclusions include driving while under the influence of drugs or alcohol, in a car that has non-approved modifications, not registered under the Road Traffic Act, or is carrying more than the legal limit number of people. Additionally you are not covered for losses due to terrorist attacks, war and riots. Some insurers also exclude physiotherapy as part of their medical expense coverage. You should always read the terms and conditions, especially if you make modifications on your car as insurers may accept some modifications but not others.

Although not an exclusion, you should check to see which auto workshops insurers offer. Some will have a list of preferred workshops while others may let you do car repairs at any. Additionally, there are territorial limits, so you will have to check with the insurer to see if you will still be covered if you drive outside of Singapore.

How to Pick the Best Car Insurance

Finding the best car insurance for you depends on your budget, your car and the amount of coverage you want. However, just because you are on a budget does not mean it is a good choice to go straight for the cheapest plan as tempting as it can be. In some cases, like if your car is over 10 years old, you'll actually be better off with a TPO or Third Party, Fire and Theft coverage plan.This is because your car has depreciated in value to the point where you will be paying hundreds of dollars extra on a policy you don't need. However, in most circumstances getting a more comprehensive plan while saving costs through other ways (including being a safe driver and utilising your NDC) can be a life-saver.

You can also find a policy based on your needs and lifestyle. For example, If you tend to drive in West Malaysia or Southern Thailand, you can find a plan that covers those territories. If you have a family, you can opt for a plan that is generous with personal accident and medical coverage and includes your passengers. If you would like further information on how to navigate the car insurance space, you can read our guides to help you compare and find the best car insurance plan.