Although a car insurance policy can be purchased online or via the agent, the entire process is relatively complicated.
Even though the internet has made it easy to contrast policies and rates, you might easily get confused by uncommon terms and jargon used by insurance companies. Also, the decision-making process is marred by persisting fallacies regarding how insurance works.
For instance, many people erroneously believe red cars are more expensive to insure. This is usually not the case as the insurance rates are dependent on factors like speeding and accidents. Therefore, if you own a red car and speed and obtain a ticket or get involved in an accident, those are some of the causes of the rate increase as opposed to owning or driving a red car.
You should always get cover for your new car with a trusted insurance company. Best car insurance Singapore evaluates several factors regarding the vehicle when setting its rates. They include make and model, engine size, repair costs, body type, age, and the prospects of being stolen but not the color.
With that said, below is a detailed guide of things to know about car insurance.
How rates are calculated
Every insurance company possesses a distinct formula for determining premium rates, but they all apply the same fundamental factors. Some of these factors include your driving record, state of the vehicle, make and model of the vehicle, how the vehicle is used, and so on.
Other factors used in determining prices include:
- Place of residence: Someone who resides in a rural area with minimal traffic and fewer car theft and break-ins is most probably considered lesser risk than a policyholder residing in an urban area characterized by high crime levels.
- Age, gender, and marital status: Studies reveal that youthful drivers, particularly those with minimal experience behind the wheel and male counterparts, are very likely to cause an accident. Conversely, wedded drivers rarely file accident claims.
- Credit score: Insurance companies in various states consider credit scores when determining premiums. According to the industry, drivers with promising credit scores have lesser accidents. However, many consumer advocates are pushing for this determinant to be outlawed as they consider it unfairly punitive to low-income car owners.
The disparity between comprehensive and collision coverage
As far as car insurance is concerned, this is perhaps the biggest point of confusion. At this point, many potential policyholders seem not to understand what they’re buying.
According to the recent insurance survey, over 60 per cent of policyholders mistakenly believe that the comprehensive part of their policy covers damage to their vehicle resulting from a collision.
According to the insurance experts
- Comprehensive: Provides cover against theft and damage stemming from an incident aside from a collision, such as a flood, hail, vandalism, falling trees, fire, etc.
- Collision: Recompenses the insured for the damage inflicted to the car due to collision with another car or other object when you’re on the wrong. In addition, it provides cover for damages emanating from potholes or from rolling your auto.
The price of the vehicle is not necessarily proportional to the insurance cost
It’s necessary to determine what your insurance charges for the various models you’re pondering when you begin shopping for a new car.
A costly SUV will probably have favourable claim rates for thefts or accidents than an inexpensive car; therefore, the premiums cost less in the end.
There are ways to lower your car insurance premiums
Perhaps, there are multiple ways to reduce your insurance premiums. In some instances, that translates to minimizing coverage. For instance, you might want to do away with comprehensive coverage on an aged vehicle.
Increasing the deductibles, which you’ll incur before insurance steps in, is another way of saving money if you’re capable of catering for potentially higher out-of-pocket expenses.
According to the insurance gurus, raising your deductibles by $300 could lower your comprehensive and collision coverage cost by 20 to 30 per cent. Raising the deductible amount to $1,000 can save you over 40 per cent.
Auto insurance companies provide discounts for safe drivers, learners with top grades, low mileage, and multiple cars.
Allow someone to drive your car, and your insurer will pay in the event of an accident
The insurance rules are very clear; that is, car insurance follows the car and not the driver.
If you lease your vehicle to a third party, you’re basically novated leasing them your vehicle alongside your insurance, in most cases.
Except for emergencies or if you’ve been an alcohol addict, you need to contemplate the insurance repercussions of allowing a third party to drive your vehicle.
The discussed above are some of the essential things you need to know about car insurance. It’s therefore important to keep insurance in mind when shopping for a car of your choice. And since the rates are not solely dependent on the type of car you drive, your overall rate may be higher or lower than someone driving a similar car.