Have you ever wondered if your motor insurance is still effective as you drive up North into West Malaysia for a road trip?

The fact is your motor car insurance policy covers you within Singapore, West Malaysia and even parts of Thailand, within 50 miles of the border between Thailand and West Malaysia. That’s how far motor insurers in Singapore cover you.

Your insurer will bear the risk of any losses or damages or liabilities incurred within the above boundaries.

This is a compulsory insurance for all vehicle owners. Under this motor insurance policy, the insurer covers only death and bodily injury to third parties, including the passengers.

In other words, this type of motor car insurance doesn’t cover damages to property or vehicle. It also doesn’t cover accidents that occur within private compounds.

Vehicle owners (almost) never take up The Act Liability Only Insurance as a stand-alone policy. Instead, this is embedded into other types of policies, like the Third-Party, Third-Party Fire & Theft or Comprehensive Cover insurance.

In Singapore, automobile owners almost always sign up for Comprehensive Cover Insurance.

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Excess is included in a private motor insurance to deter motorists from making small claims. Excess is the initial amount of any claim that the auto insurer will not pay. In other words, the car owner has to bear this cost.

For example, if the cost of your claims amount to $2,000 and the deductible is $600, you’ll have to bear $600 while the rest can be claimed from the insurer. An illustration is drawn for you below:

If the total amount (for repairs, damages, etc) is less than the excess ($600), nothing is payable by the insurer.

But…why do the insurers want to impose such an idea on motor car insurance? Because…

- The insurers hopes that the drivers will take more care and responsibility as the driver still has to pay for damages not exceeding the excess amount.

- Claim payouts (by the insurers) are reduced by the excess amount, the risk/liability of the insurer is also reduced. This also lowers the insurance premiums.

- There are fixed costs incurred to service each claim, it doesn’t make sense (economically) for the insurers to attend to each and every small claim.

- For customers with bad claims experience (profiled as high risk for the insurers), higher excess can be imposed to allow their car insurance to remain in force. This also keeps their premiums within financial reach.

You can certainly request for excess to be removed or reduced in some cases. But since the insurers are taking on extra risk, your premiums will go up by quite an amount. For drivers under 21 (or 23) years old, such excess cannot be removed.