Tuesday, July 30, 2013

What to consider when buying car insurance?

Here is a guide from the General Insurance Association of Singapore on buying a motor insurance policy:

Not all motor insurance policies are the same. To meet the individual needs of customers, insurers offer a wide variety of products. By shopping around, you will have the best chance of finding a policy with your preferred combination of price, excess and requirements relating to use and repairs.

As a general rule, the lower the premium, the more restrictions may apply to what is covered, how much you would be paid in the event of a claim, and what your options may be in the event of a claim. For instance, low-priced policies might come with restrictions as to where you can send your vehicle for repair or whether new or reconditioned parts are used. More expensive policies may allow more flexibility in your choice of repairers, etc.

The following are important things to consider when buying a motor insurance policy:
·        Are there restrictions on who can drive the vehicle?
·        What extra cover can you buy?
·        Does the policy meet the requirements of your bank or finance company if you are buying the vehicle on hire purchase or a car loan scheme?
·        How much excess will you be required to pay should you need to make a claim?
·        Does the policy require you to take your vehicle to an Independent Damage Assessment Centre (Idac) for damage assessment?
·        Does the policy have restrictions on who is permitted to repair the vehicle?
·        Will reconditioned parts be used for repairs?

1) What is an excess, and how does it work?

An excess is the cost you may be required to bear in the event of a claim being made against your policy. Generally, the more risk the insurer carries the higher the excess will be.

2) Why is it a good idea to tell my insurer who will be using the vehicle? 

Declaring the names of the people who will be regularly driving your vehicle allows your insurer to assess the risk profile accurately and set the appropriate premium and excess.

You are required to fully disclose information that may have a bearing on your policy cover. If your vehicle is damaged while being driven by a person not named in your policy, the insurer may apply a higher excess due to the unknown risk covered.

If the vehicle is damaged while being driven by a young or inexperienced driver not named in the policy, you may be charged a higher additional excess because the driver represents a higher degree of risk. The definition of young and inexperienced driver varies from insurer to insurer. Please check the definition in your policy.

For some vehicles, such as high-performance cars, your insurer may specify that coverage will only apply to drivers named in the policy, i.e. authorised drivers.

3) Will my insurer cover me if I teach a provisional driving licence holder how to drive in my vehicle? 

No, your motor insurance policy will not cover you. Only a certified driving school can teach a provisional driving licence holder how to drive a vehicle.

4) Can I choose who repairs my vehicle?

Your insurer may impose some restrictions on who can repair your vehicle. As part of an ongoing effort to control claims costs, some insurers use the tender bidding system or authorised workshops in making arrangements for repairs. Cost savings will benefit customers by keeping premiums competitive.

More expensive policies may allow you to go to the repairer or dealership of your choice. Your insurer is encouraged to disclose any restrictions on repairs before you buy the policy.

Dealer workshops

The warranty on new or relatively new vehicles will often state that the vehicle has to be repaired by the dealer or appointed agent of the manufacturer. If this is the case with your vehicle, you should check with the authorised motor dealer, agent or distributor on the terms and conditions of your warranty as repairs by other workshops may affect this.

Authorised workshops

Some insurers limit your choice of repairer to a panel of authorised workshops which does not always include authorised dealerships. Upon completion of repairs, a six-month warranty is usually given.

5) What is tender bidding?

In order to obtain cost-effective repair for your vehicle, some insurers use the tender bidding system. Insurers will invite selected workshops to provide quotes for the repairs to your vehicle and will award the job to a competitive bidder. Insurers adopting this system offer assurance that there will be no compromise on the quality of repairs. A post-repair survey may be conducted on the vehicle before it is returned to you.

Insurers adopting the system of authorised workshops and tender bidding seek to control claims costs without compromising quality. Such cost savings benefit customers in the form of competitive premiums.

6) Will my vehicle be repaired with new or reconditioned parts?

The aim of most policies is to have your vehicle restored to a condition similar to the one it was in before the accident.

Based on this principle, for a relatively new vehicle, damaged items will usually be replaced with new parts, which are either genuine or OEM (Original Equipment Manufacturer) parts. 

However, for vehicles more than three years old, the insurer might opt to use good-quality reconditioned parts. Such parts are carefully checked to ensure they do not compromise the safety or roadworthiness of the vehicle. A six-month warranty for repairs is usually provided by the workshop.

Your insurer will be happy to clarify its policy on replacement parts.

7) What is Idac?

The Idac network was set up to provide a fast, impartial accident assessment service and to reduce claims fraud. There are Idac at convenient locations around Singapore.

Many insurers require policyholders to deliver their vehicle directly to an Idac following an accident. Check with your insurer if in doubt.

If your insurer is a member of Idac:
·        Your vehicle will be towed free of charge to an Idac within 24 hours of the accident. An assessor will record visible damage and prepare a report on the replacement parts needed.
·        Once you have the report, you can make arrangements with your insurer for the vehicle to be repaired.
·        Remember: Do not authorise any repair work without the consent of your insurer as it will need to negotiate repair costs with the workshop before repairs begin.

If your insurer is not a member of Idac:
·        Your authorised workshop will contact your insurer to have the vehicle surveyed and authorised for repairs.

8) Should I insure my vehicle with or without COE and PARF?

The market value of the vehicle includes the certificate-of-entitlement (COE) and preferential additional registration fee (PARF) component. If your vehicle is bought using hire purchase or a car loan scheme, the bank or finance company may require you to insure the vehicle at its open market value (OMV), including its COE and PARF. If you own the vehicle, it is your choice.

Under current Land Transport Authority (LTA) regulations, a person may encash the un-used and valid PARF/COE rebate(s) if he/she does not intend to use the rebates to offset either the upfront taxes payable at registration of a vehicle or the Prevailing Quota Premium (PQP) (for COE rebates only) to renew the COE of his/her existing vehicle.


  1. Nice information, many thanks to the author. It is incomprehensible to me now, but in general, the usefulness and significance is overwhelming. Thanks again and good luck!

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