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.