Because car insurance is mandatory in Singapore, a large numbers of car owners consider it a necessary expense and do not give much thought to how much they are paying for it. This is especially the case because you cannot do much to reduce the annual car insurance premium that charged by insurance companies. Insurers use an extensive set of data about the claims and accidents to calculate how much they will have to pay for claims and what insurance premium they can charge. For example, people over the age of 30 have fewer accidents than younger individuals. Similarly, they are aware that women tend to be safer drivers than men. Therefore, men below the age of 30 fall into the highest risk category and are required to pay greater premiums.
Despite these classifications, there are still a number of ways to reduce your car insurance costs. Here are some of the ways in which you can save thousand dollars or more every year on your car insurance.
1. Shop around for the best rates
Most car buyers in Singapore choose to purchase a car insurance policy through their dealer. Since not doing so comes with a penalty fee, it may make some economic sense to do so for the first year. However, these policies sold by car dealers typically cost S$3,000 or more, compared to the average cost of around S$2,000 for most car insurance products in Singapore. Given this, you should always try to shop around for a cheaper car insurance policy online when it's time to renew your car insurance. According to ValuePenguin's calculations, you could save S$1,000 or more by switching to a cheaper option.
When you are shopping around for a new car insurance, you must take the basic precaution of getting quotes from at least a few insurers when your car insurance comes up for renewal. This will allow you to compare the features and prices of different insurance companies. But you should remember that the cheapest is not always the best. Study the terms and benefits of each policy carefully before taking a final decision. You can check out our guide on how to find the best car insurance to make a more informed decision.
2. A private settlement could be preferable for a minor accident
If you get into an accident that does not result in much damage to your car, it may be better to opt for a “private settlement.” Let's assume you just got in a collision with another car and both vehicles suffer damage that would cost just a few hundred dollars to repair. If you decide to mutually settle the matter, it could save both of you the trouble of approaching your insurance companies for compensation.
This is useful because of two reasons. First, most car insurance policies come with an "excess" or "deductible" of S$600 to S800, meaning you have to pay out of your pocket for any repairs before you can make a claim. Therefore, if your repair costs S$700-S$1,000, you might be only getting a hundred or two dollars from the insurance company. More importantly, making a claim could hurt your your No-Claim Discount (NCD) that your insurer provides, which could increase the cost of your car insurance by a few hundred dollars, effectively negating most of your insurance benefit. Instead, by opting for a private settlement for small damages, you can allow your NCD discount to continue.
Remember that both parties would need to sign a private settlement form and submit it to their respective insurance companies. Here is a sample form from NTUC Income for interested readers.
3. Other Ways to Preserve Your NCD
The NCD can reduce your premium by as much as 50%. The following chart sourced from the General Insurance Association, a trade body representing non-life insurers in Singapore, illustrates the year-wise discount that you can earn.
|5 years or longer||50%|
Hence, if you have not made a claim for the last five years, your savings on an insurance premium of S$2,000 could be as much as S$1,000.
What if you had a minor accident and made a claim on your insurance company. If the claim amount was just two or three hundred dollars, your NCD of S$1,000 could decline to S$800. However, it could still be possible to preserve your NCD. All you would have to do would be to refund the insurance claim amount that you have received to the insurance company. Some insurers also provide a NCD protector that allows you to continue getting the benefit of your NCD even if you have an accident for which the insurer has to pay you a claim amount. This facility requires you to pay an additional premium and is usually available only for a single claim.
4. Consider Buying a Dual Year Policy
The majority of insurance policies are for one year, but recently, some insurers like Aviva have introduced two-year policies. Why should you tie yourself down for two years? By forgoing the option of getting a lower premium from another insurer in the second year, you can lock in a cheaper car insurance premium today. From our analysis, a 30-year old male driver can save around S$50 in annual premium by going for the 2-year policy. This also provides an assurance that your insurance premium will not be hiked in the second year, though it also prevents you from taking advantage of lower premiums should market prices fall over the next 12 months.
5. You Can Earn Discounts For Safe Driving
NTUC Income, the leading insurer in Singapore, has recently introduced Drive Master, a smartphone app that measures your driving skills by using telematics. If you accelerate smoothly, do not brake suddenly, and keep within speed limits, you will earn a higher score on the app. This could earn you up to 20% off on your insurance premium. Not only that, if you do not commit any traffic violations for three years, the Singapore Police will issue you a certificate of merit. This entitles you to a discount of 5% on your car insurance premium in addition to your NCD.
This article was first published at ValuePenguin.