There are 3 main types of car insurance policy:
1. Comprehensive Coverage
2. Third Party Fire & Theft Coverage (TPFT)
3. Third Party Only Coverage (TPO)
Each insurance policy has its unique characteristics. The coverage that you should get depends on a few key factors. We’ll take a look at them here.
Comprehensive car insurance offers you the best protection. It has the protection that Third Party Fire & Theft gives, and in addition it protects your car against accidental damage, malicious damage and windscreen damage.
On top of these basics, you can also enjoy a plethora of benefits like Personal Accident coverage, Towing Service and Medical Reimbursement. Quite often, you may also enjoy insurance riders such as NCD Protection, Loss of Use Benefit, Waiver of Excess, Free Choice of Workshop, et cetera, for an additional fee. At times during promotions, one of these may even be thrown in free-of-charge.
It is important to understand clearly the benefits and restrictions to your vehicle insurance policy. Therefore you must refer to your policy document for details. (We often summarise them for our clients since they can be a little technical.)
If you are buying a new car, you are almost always required to buy Comprehensive Insurance. This is a requirement from the finance company (a.k.a. hire purchase) that you took a car loan from. Here’s why.
Since the car is technically owned by the finance company, any total damage to the car will not leave them in the red in case you refuse (or are unable) to pay up the remaining car loan.
For this reason, some finance companies also do not allow car owners (hirers) to buy Third Party Fire & Theft coverage. Because there is still some unmanaged risk that the finance company has to bear. Thus before you sign up for a TPFT car insurance coverage, drop your hire purchase company a line to check.
On the other hand, if your car is fully paid, you are free to insure your car under any type of car insurance coverage, even Third Party Only insurance.
Third Party Fire & Theft Coverage
A Third Party Fire & Theft insurance has the protection that Third Party Only insurance offers, and it also protects your vehicle against total loss due to fire or theft.
Even though this type of insurance may be more affordable than Comprehensive Coverage, it may not be your best option since it offers only limited protection. This means if there is any damage to your car, however expensive that may be, you cannot make an insurance claim for it. You have to cough out the money from your own pocket to repair your car. Thus it may eventually be more expensive to insure your car under such insurance plan.
Having said this, it doesn’t mean TPFT coverage is useless. Some car owners love to buy old cars with a very low body value. As such, all they need may be TPFT or TPO coverage.
For example, you bought a 9-year old car that costs $12,500 (fully paid in cash) and it has almost zero market value. What you essentially need is an insurance coverage that protects you from third party liabilities. Meaning you make sure you can compensate others in case you knock into their expensive cars (or property).
Any exterior damages to your old car are often left unrepaired anyway. And in case the vehicle is damaged beyond economical repair, it can be scrapped without losing too much money.
Third Party Only Coverage
A Third Party Only insurance essentially protects third parties (other road users and property owners) so they do not suffer financial loss should you harm them or cause damage to their asset.
This is the most basic form of car insurance required by law in Singapore. Like Third Party Fire & Theft coverage, this type of insurance should only be bought under specific circumstances. Because it merely compensates for damages you cause towards other people.