How Does A Car Insurance Policy Work?

Apr 14, 2021 10:04 AM EDT | Ernest Hamilton

How Does A Car Insurance Policy Work?


(Photo : How Does A Car Insurance Policy Work?)

Car insurance in Singapore is not a choice or a luxury. It is a must-have or a necessity if you own a car. Many people don't have a clear idea about a car insurance Singapore package. Dealers also come up with many confusing terms like no claim bonus, co-insurance and excess. If you want to make an informed decision, you need to do your research and understand how a car insurance policy works.

A brief overview of different types of car insurance Singapore packages

Generally speaking, there are three types of car insurance options available in Singapore, namely Third Party Only (TPO) Insurance, Third Party, Fire and Theft and Comprehensive Coverage. The first one, Third Party Insurance refers to the insurance that covers the other party involved in an accident. If your car collides with another vehicle, this type of insurance pays for the damage caused by you to the other vehicle.

Covering both parties involved in an accident, a Third Party, Fire, and Theft car insurance Singapore protects the interests of all stakeholders. You can expect the best protection against fire and theft. This type of insurance also covers vandalism.

As the name suggests, Comprehensive car insurance Singapore covers you for almost everything. Most people prefer to buy this insurance not only because of the excellent benefits it offers but also being a condition of several car loans. It covers death for you and third parties, medical expenses, theft, fire and accidents.

Some car insurance Singapore companies often pay the claim in full if they find that the accident occurred is not because of your fault. When you choose a car insurance company, you must do your research. It is always advisable to rely on a car insurance comparison Singapore chart that offers accurate information.

Method of calculating premium

Several factors are taken into consideration while calculating the premium of your insurance coverage. Risk Factor Rating System (RFRS) is the method applied to determine the premium. Driver-related factors include age, experience, gender and occupation. As far as the car is concerned, the vital factors are OPC, engine type and capacity and vehicle age.

Another important aspect that influences the premium of a car insurance policy is the No Claim Bonus or Discount. It refers to a bonus or discount provided by the insurer each year. Safe Driver Discount also makes an impact on the premium. It is a special discount offered to reward drivers who do not have any demerit points for the last two years.

Learn about Excess, Deductible and Co-insurance

You need to have a better understanding of these three terms if you want to know how a car insurance Singapore policy works. Many people use these terms interchangeably. It is a slightly complex concept to understand. However, you can consider it as the amount that needs to be paid before your car insurance kicks in.

Let us make it slightly easier for you. Imagine that your excess amount is fixed as $500. The total expenses required for the repair works are estimated to be $2,000. As the insured person, you have to make a payment of $500. The insurer will pay the balance amount of $1500. The basic intention behind this concept is to make drivers realise that they have to pay for the damage due to their faulty driving. This approach motivates them to drive with better focus and safety awareness.

Let us consider another situation. Imagine that your excess amount is $600 and the quote for repairs is $500. In this situation, you will make the payment for the repair works ($500). However, this amount is under your excess amount of $600. In this situation, you don't have to make an insurance claim. This approach helps you protect your No Claim Discount. One important thing you must remember is that all accidents or damages should be reported to the insurer, irrespective of the size or gravity.

Many people want to know whether they can change the excess amount to be paid. The excess amount of younger and inexperienced drivers is always set at a higher rate. The best thing is that most reputed insurance companies in Singapore let you adjust your excess amount based on your unique circumstances and budget.

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