3. What is excess? And how much should it be?
“Excess” refers to the amount you have to pay out of your pocket before the insurance company pays for the rest.
For example, Ryan is coasting down the freeway, headbanging to a Linkin Park album when a tree jumps in his path. He slams into it, and the cost to fix his car is $2,000. His excess is $600 (for a pretty comprehensive plan). So he just pays $600, and the insurer forks out the remaining $1,400.
Excess is inversely related to the cost of the car insurance plan. In plain English, this means…
Low excess = expensive insurance premium. If an accident happens, you’ll be very glad you need to fork out only $600, especially since you might already be stressing out over medical bills and having a rough time in general. But you will feel very broke when you pay for your annual car insurance premium. If you’re looking for a low excess of $300 to $400 or so, you can expect to pay $3,000 upwards for your annual premiums.
High excess = cheaper insurance premium. The good news is, you’ll get a bargain on your car insurance. The bad news is, you’ll be afraid to drive your car. This is a risk you might not want to bear unless you’re the safest driver on earth and enjoy the protection of a prominent deity.
Note that if you add on a perceived “risky” driver – eg your kid (under 23 years old with less than two years of driving experience) who’s just gotten her driver’s license – your insurer might force you to accept an additional young and inexperienced driver excess without any discount on your premium.
4. Should I get comprehensive or TPO (third party only) car insurance?
TPO car insurance is the minimum requirement in Singapore. It’s cheaper and only covers damages to other people’s cars. If you bump into someone’s fender and he responds as though you had taken liberties with his wife, you can claim for the damage to his car to shut that loser up. But you can’t claim any damage to your own car.
Comprehensive car insurance usually costs a few hundred bucks more but covers basically anything that might happen to your car plus any other parties involved. As the name suggests, this kind of car insurance policy has the widest coverage including things like flooding… which never happens in Singapore because we only experience “ponding” (see section 12).
Which one you choose depends mainly on the car’s value and age.
Consider TPO if your car is at least ten years old and fully paid off, or if you have a cheap (ha, “cheap”) second-hand car and it’s already banged up anyway. If it’s really badly damaged, you might choose to scrap the car.
If you saved for years for your brand-spanking new car, you’ll definitely want to get comprehensive car insurance. Otherwise, you’ll be in a world of pain when it inevitably gets damaged. The difference in price isn’t huge anyway.
Oh, if you bought the car on a bank loan or if you’re still paying the installations, you might not have a choice. No bank wants to repossess a Subaru from a drain.
5. What are the named drivers? Should I add other drivers to my policy?
When you sign a car insurance contract, you are the default “named driver”. In other words, figures like the excess pertain to you.
Those figures change if an unnamed driver wrecks your car. So you may pay an excess of $200 if you wreck the car, but if your brother removes a lamp post with it, the excess might be $1,200 instead.
Instead of letting that happen to you, consider adding other drivers. This used to incur higher premiums, but these days many insurers will allow you to add three to five named drivers for free, as long as they are at least 27 years old and have a minimum of two years’ driving experience.
If your kid brother is always “borrowing” your car for his late-night prata runs, you might want to think twice before adding his name though. Some insurers will force a high excess upon you eg $3,000 if you add a young or inexperienced driver to your policy.
6. What is NCD? Should I pay for NCD protector?
The NCD (No Claim Discount) or NCB (No Claim Bonus) is a discount applied to your premium if you’ve been good. You get this in increments of ten per cent when you don’t file any car insurance claims for the year, and it accumulates for each year without a claim.