3 types of car insurance in Singapore

When you buy a car, or event rent a car - the topic of car insurance always comes up. In Singapore, motor insurance is mandatory for every single car on the road. And this is a practice in many other countries as well. This is because insurance protects you, and other road users.

How does it protect you and other drivers?

Well suppose you were driving along, and you get into an accident with another car. Your car is badly damaged, and so is the other driver’s car. After exchanging contact details etc. and towing the car to the workshop, you get a call from the other driver’s workshop telling you that the repairs for the car you hit will cost $15,000.

Now - what if you didn’t have $15,000? How are you going to pay for the repairs for the other car? (let’s leave out taking a loan, etc. for simplicity’s sake)

This is where your motor insurance comes into play. The other driver can simply claim against your insurance company, meaning he will get your insurance company to pay for the repairs to his car. All you have to do is fork out for the insurance excess for your car, which is stated in the insurance plan when you buy it. This is called the insurance excess. More often than not, the insurance excess that you pay will be less than the $15,000 repair cost - so this saves you from paying that $15,000 (you may end up paying only $3,000 instead). So it makes sense to pay the excess, and let your insurer cover the balance ($12,000).

So motor insurance protects you from paying hefty amounts, and also protects other drivers from getting their car damaged, with nobody out there footing the bill.

But what if you get into an accident, but the damage to the other party’s car is minor? Perhaps the other driver quotes you $500 for repairs. Should you still make a claim against your insurer? In this instance - always check with your insurer what your excess is (in reality, you should already know this when you sign on the dotted line).

Let’s say the insurance excess is $3,000. In this instance, it makes sense not to claim against your insurance - since you can just pay $500 to the other driver for his repairs and move on with your life. This is what is commonly called a private settlement. This means the parties involved in the accident settle their repair costs etc. privately, without getting their insurance companies involved.

Essentially, if the amount that you have to pay for the accident is less than your insurance excess, then you should settle privately and not get your insurance company involved.

If the amount to be paid is more than your excess, then you should consider claiming against your insurance.

Of course, you are paying the insurance company monthly/yearly for this protection, and if there is a claim against your insurance, your premiums may go up (i.e the amount you have to pay for insurance will increase).

This is also why insurance companies have this thing called ‘NCDs’ or no claim discounts. NCDs reward drivers who do not make a claim within a certain period. They reward them by offering discounts on the insurance, up to about 50%. So if your insurance was $1,000 a year, and you have an NCD of 50%, then you are effectively saving $500 per year by only paying the remaining $500.

So what are the 3 types of car insurance available in Singapore?

1. Third Party Only

In the event of an accident, Third Party Only (TPO) insurance covers the other party involved. Meaning to say that the insurance pays for the other person’s damages. So if you get into an accident with another car and your bumper and the other driver’s windshield is damaged - the insurance pays for the other driver’s windshield. You will be paying for your car’s bumper from your own pocket.

Third party only insurance is also the cheapest type of insurance available for drivers.

2. Third Party, Fire, and Theft

This insurance type covers the above (third party only) and fire and theft. Meaning to say that if you car gets stolen, you can make a claim and your insurance will pay you a certain amount (which they will calculate). If someone sets fire to your car, you will also get paid by your insurance company. However - it still means that if your car is damaged in the event of an accident, you are unable to claim against your insurance as the insurance does not cover it. You’ll be paying for repairs for your car from your own pocket.

3. Comprehensive Car Insurance

Comprehensive Car Insurance gives you the best coverage. It includes fire and theft, and damages to your own vehicle. This is also the most common type of car insurance in Singapore because a lot of car loans require the owner to take up this insurance type. Reason for this is because the car is still technically owned by the finance company (as the car has not been fully paid off) - so any damage or total loss to the car will not leave the company losing money, just in case you are unable to pay up the remaining car loan. Once you have fully paid off the car, you are free to choose any motor insurance as you please.

Comprehensive car insurance may also include the following :

  • Personal Accident coverage

  • Towing Service and Medical Reimbursement

  • NCD Protection

  • Loss of Use Benefit

  • Waiver of Excess

  • Free Choice of Workshop

Do note that these usually come at an additional fee, but be on the lookout for promotions as they can be thrown in for free during promo periods.

Another point to note is that some banks or financial institutions (FI) require you to get a certain type of car insurance when you buy the car (which is usually comprehensive insurance). As mentioned, the bank/FI does this to ensure that you can still pay back your loan, even when your car is damaged badly (and requires lots of $$$ to fix).

So how do you know which insurance is best for you? It pays to do some research and get different quotes from different companies. It may take some time but it definitely helps you save some money, as there are some insurance companies out there who are more expensive than others, yet cover more or less the same stuff.

Things to take note of when choosing car insurance :

  • Coverage (what the car insurance policy covers)

  • Premiums (how much you pay monthly/yearly for the coverage)

  • Excess (how much you have to pay in the event of an accident)

  • Features (like the list we mentioned above)