Buying car insurance can be a complex process.
But if you want to get the best value for your money, it's
important to get off on the right foot by having as clear an
understanding of how buying car insurance in Singapore works.
That's why our team at ValuePenguin has compiled this list of the
top 7 myths about car insurance you don't want to fall
for.
If this is your first time buying
comprehensive car insurance, you may be under the misconception
that as long as you pay your annual premium, you don't have to
worry about paying for any other expenses out of pocket if you get
into a car accident. That's the whole point of car insurance,
right?
Wrong. Every car insurance policy will include
something called the "policy excess" or "standard excess," termed
alternatively as the "deductible." This is a set amount of money
that you will have to pay out of pocket before your insurer will
step in to cover the costs of repairing your car and any other
bills (medical, etc.) you may have incurred. The excess helps to
mitigate the risk insurers take on in covering your potential
losses by making sure you have some skin in the game and won't
abuse your car insurance plan by engaging in reckless or dangerous
driving behavior.
The typical standard excess in Singapore tends
to range between S$600 and S$1,000, with insurers differing in how
much they'll allow you to adjust it. Some insurers such as AIG or
NTUC offer very limited options to adjust your standard excess for
a higher or lower premium during the car insurance purchasing
process, whereas others are much more flexible. FWD, for
example, lets you set your excess anywhere from S$500 to S$2,500,
and Etiqa will
let you adjust your excess from S$200 to S$2,500.
The reason you might want to adjust your
standard excess to a higher or lower amount is because doing so
will affect how much you have to pay in premium costs. If you set a
higher excess, you can lower your premium; and if you set a lower
excess, your premium will increase. For example, the average
45-year-old male driver with 5 years' driving experience and 0% NCD
of a 2016 Toyota Corolla Altis 1.6 could save up to S$350 on car
insurance from FWD just by changing how much he wanted his standard
excess to be. If you want to minimise the shock that a mandatory
outlay of hundreds of dollars out of pocket after an unexpected
event like a car crash will have on your wallet, you may wish to
opt for a higher premium. But if you are less risk-averse or more
concerned with minimising certain costs as opposed to potential or
unlikely costs, you may consider setting a slightly higher standard
excess for a slightly lower premium.
Comparing the cost of FWD car insurance for the average
45 year old male driver with 0% NCD and 5 years of driving
experience at different standard excess levels
You might suspect that consistent with the urban legend
that red cars get pulled over and ticketed more frequently, drivers
of red cars have to pay more for car insurance. It turns out that
this is not usually the case, however, for the simple reason that
most insurers won't even ask you to provide them with the color of
your car when you apply for car insurance. If they don't know what
color your car is, they can't charge you more or less on your
premium based on that variable. There can be exceptions, however.
In the course of our research, we noticed that a few insurers such
as Sompo may actually collect this data and use it when calculating
how much your premium should be. It may impact your premium by
anywhere in the range of S$5 to S$40. As always, we recommend that
you compare the quote you get from one insurer against a good
number of others based on your driver profile to see which insurers
may offer you the best deal for the amount of coverage you
require.
One popular stereotype that has held up through the
ages is that women are, for whatever reason, worse drivers than
men. As such, you'd expect them to get into more accidents and
consequently have to pay more for car insurance based on being a
statistically more risky demographic.
Actually, insurance companies consider men to be a much
riskier bet to insure than women, since it turns out that men are
statistically more accident-prone than women - and we know exactly
how much more accident-prone they are. Based on
Aviva's claims data
from 2015, men are 1.4 times more likely to get into a car
crash as women. So it comes as no surprise that holding all other
variables such as age and driving experience equal, we found
that male drivers
always pay more on car insurance premiums than female
drivers. If you're a woman, depending on your age, you might expect
to pay anywhere from about S$40 to about S$250 less than a man
sharing your driver profile would.
Comparing the average cost of car insurance for men and
women at different age groups
The premiums reflected in the above chart assume a
driver with 5 years of driving experience and 0% NCD with a 2016
Toyota Corolla Altis 1.6.
What happens to your car insurance premium as your car
gets older? If asked, the average person might guess off-hand that
it rises as your car's parts start to wear down from age and use.
But the truth is a little more complicated. Our team at
ValuePenguin looked at how car insurance premiums for comprehensive
and third party plans change as the reported age or registration
year of the vehicle to be insured changes. We found that in
aggregate, the cost of
car insurance is highest when a car is newest (in its
first 2-3 years on the road), falls as it ages up to 10 years old,
and then tends to begins to rise again in small increments.
Comparing the cost of comprehensive car insurance for a
Toyota Corolla Altis 1.6 of varying ages
However, the average is not always reflective of how
individual insurers handle this matter. Some insurers actually
decrease their prices or hold them constant as the car in question
begins to age past 10 years old, presumably having accumulated a
significant amount of mileage by that time. And some insurers don't
just increase their premiums a little for aging cars, they increase
them quite significantly. That's why it's always in your interest
to continually survey the competition each year it's time to renew
your car insurance plan to see if there's a better deal out
there.
The most common type of car insurance bought in
Singapore is comprehensive car insurance, which covers not only
your liability to losses or damages caused to the other party in a
car accident but also your own losses and damages, to your car,
your person, your belongings and even your passengers. It's the
most popular kind of car insurance for good reason, as it offers
you significantly more protection of your assets in the case of an
accident and is often worth spending the extra cash on.
But not always. What makes a comprehensive car
insurance plan most valuable is the insurer's commitment to paying
the full cost (minus the excess) of repairing your car after a
crash, or paying out the amount of its Open Market Value (OMV) if
the cost of repairing is determined to exceed its OMV. This is
great when your car is on the newer side, because its OMV will not
have depreciated too much yet. But after enough years, your car's
OMV will have depreciated to the point where it's much more likely
that if you get in a bad crash, your insurer will simply pay out
its remaining OMV and scrap the car - and the payout you receive
may be extremely low. So low, in fact, so as to not be worth the
cost of paying for a comprehensive plan. In this scenario, you may
be better suited by a third party only (TPO) or third party, fire
and theft (TPFT) car insurance plan with a significantly lower
premium.
Be careful not to assume that your car insurance plan
covers you when you're driving someone else's car. If you read the
terms and conditions of most car insurance policies, it becomes
clear that you (and however additional named or unnamed drivers
your policy
accommodates) are insured under your plan when driving only
your vehicle. So if you drive another person's car, whether or not
you are covered will depend on the specific terms of their car
insurance plan, not yours. So before you get behind the wheel of
your friend's car, make sure that you're not setting yourself up
for unnecessary risk and unanticipated expense should something go
wrong.
Going through the process of buying car insurance can
be a bit of a hassle, and it's certainly not a task most of us want
to spend any more time and energy on than is necessary. But taking
the time to do your research can save you from paying much more
than you actually need to for solid coverage. While you might think
that many insurers will tend to offer you similar premiums and that
the difference between prices you're quoted may not be enough to
justify going to all the extra trouble, our study of
the best cheapest car
insurance plans in Singapore found that the average
Singapore driver could save up to about S$800 just by scoping out
the competition to find a better deal - without having to sacrifice
crucial benefits and coverage levels.
The article Don't Fall
for These 7 Myths About Car Insurance originally appeared
on ValuePenguin.