A private settlement form is useful for handling minor car accidents where no bodily injuries are involved. Many incidents result in damages that cost no more than $1,000+. As such, it may not be wise to make a car insurance claim.

Here is what you should do:

1.    Decide with the other driver(s) on the spot that the damages are minor
2.    Get all parties to sign on the private settlement form

If you don’t already have a private settlement form in your car, click on the link below then download and print out at least 6 copies:

http://www.motorinsurancesingapore.com/signaturepad/upload/files/archive/PrivateSettlement.pdf

Nevertheless it may be a challenge to convince the other party to sign on the agreement if they see an ugly dent on their bumper. After all cars are expensive in Singapore and it’s painful to see their precious in this state.

What both of you should do is drive to the nearest workshop and determine the damage (in dollars and cents). After the other party is convinced the repair cost is not worth claiming under his insurance (or yours), he’ll be more willing to sign on the private settlement form.

Even so, many people are quite ignorant about making car insurance claims. And they have no idea what’s going to happen to their renewal premium after each claim… If you are talking to someone like this, you have to educate him on why private settlement is the most ideal way to conclude the incident.

Why You Should Use Private Settlement For Minor Damages

Two things happen when you make a motor insurance claim:

(i) your NCD drops, and

(ii) your renewal premium increases because the insurer will impose a loading.

The net effect is you have to pay more in premiums for the next 3 years. What you claim from the insurance company will almost always be much lesser than what you have to pay back in the near future.

Suppose you suffer a damage of $1,500 and your excess is $600. In this case, what you can claim from the insurer is $900. Because of this claim, your NCD drops by 30%. This will add an average of $300+ to your annual premium. (The actual value depends on several factors.) Also, there’ll be a loading imposed. This may amount to another $100+ more. In the next 3 years, you’ll easily pay more than your original damage ($900).

Having said this, it does not mean you shouldn’t make an insurance claim. This is because the purpose of motor insurance is to protect you from huge financial loss. For this reason, if the damage is large enough, by all means make a claim.

How to Use the Private Settlement Letter

The private settlement letter must state the following details:

a.    Location of incident
b.    Date and Time of incident
c.    Terms of Agreement
d.    Particulars of all drivers involved
e.    Signature of a witness

Fill up each field of the form with as much detail as you can. On top of this (if you can), take photos of any damages to your car and the other party’s car.

After signing the private settlement letter, both of you are bound to the agreements stated. As such, you (or the other party) will not be able to make claims against each other. This means you will not experience any complications when you renew your car insurance.

You do not need to make a police report since there is no bodily injury. Yet under the Motor Claims Framework (MCF), you MUST report the incident to your insurer within 24 hours and send them a copy of your private settlement form. In case the other party tries to make a claim against you, his effort will be futile.

Note: In case you are involved in a chain collision, the party in front of you and behind you must sign on the private agreement as well. This is why you must at keep at least 6 copies of private settlement form in your car – 2 for the car in front, 2 for the car at the back and 2 extra copies for contingency.

A No-Claim Discount (NCD) entitles you to a lower car insurance premium. The maximum NCD you can have is 50% and the lowest is 0%. Thus the discount you get depends on how high your NCD is. This is one of the ways you are rewarded for being a safe driver.

If you have not made any insurance claim in the past 1 year, your NCD will increase by 10%. The 2 tables below illustrate this:

For Private Cars:

For Commercial Vehicles and Motorcycles:

With the above in mind, it does not necessarily mean you will lose your NCD if you make an insurance claim.

In Singapore, insurers depend on a benchmark known as the Barometer of Liability Agreement (BOLA) to determine what your responsibility is for each accident you get into. As long as it is less than 20%, your NCD will not be affected.

Otherwise your NCD may drop by 30%, as illustrated in the table below:

There is a common misunderstanding about No-Claims Discount you must know about. People are often confused whether their NCD applies to them or their vehicle.

Technically, your NCD applies to you. This means whether you switch to another insurer or buy another vehicle, your NCD remains with you. Nevertheless if you own a second car, the NCD for that vehicle will have to start from 0%.

In other words, your NCD can be transferred from one insurer to another and from one car to another. But it cannot be transferred from one person to another.

(NCD also cannot be transferred from one vehicle class to another. For example, you cannot transfer your Motorcycle’s 20% NCD to your Car or vice versa.)

If you are concerned about losing your NCD in case of an accident, you can buy an NCD protector.  Most insurers only allow you to buy this rider if your NCD is at 50%. With this, even if you make an insurance claim, your NCD will not drop.

However you have to bear in mind that your NCD protector cannot be transferred from one insurer to another. This means if you want to retain your NCD at 50% after an accident, you have to renew with your existing insurer.

Finally, if you don’t own a car (or vehicle) for more than 12 months, you will lose your NCD. For example, if you sold off your car and went overseas, then bought a car again after more than 12 months, your NCD will start from 0% again.

If your car insurance renewal is near, you may find a great insurer by getting car insurance quotes from as many as 12 different car insurers. Simply take 2 minutes to fill up the form at www.motorinsurancesingapore.com and the best 3 quotes will be sent to you.