Understanding the types of car insurance in Singapore

There are plenty of things for new drivers to take note of, and in case you didn't know, every driver needs a valid car insurance policy in order to drive on the roads in Singapore.

The idea of car insurance is simple - like other insurance products, you pay an annual insurance premium, and in return you are covered with a payout in the case of an accident. That is the rough idea, but there are some specifics that you should understand when it comes to car insurance policies, and we are here to explain it to you.

Car insurance is mandatory for one to drive a car in Singapore

I don't believe in insurance, can I choose to drive without insurance?

Most importantly, no, you can't drive a car without valid insurance coverage in Singapore. In fact, your driving license can be revoked if you are caught driving without one. While it might seem heavy handed, the rationale behind it is rather sound.

Motor vehicles (both cars and motorcycles) are heavy machineries that can seriously injure or even kill, and the thing about accidents is that you'll never know if you'll get into one. The primary purpose of a car insurance policy isn't to safeguard your own finances. Instead, it is to ensure the other party's in case of an accident.

Confused? Just imagine, if an uninsured driver knocks down a pedestrian, and he does not have the financial capability to compensate the injured pedestrian for his costly medical fees, the pedestrian would be left in the lurch and stuck with a costly bill with no simple way to recover the amount despite being a victim. However, if the driver's insured, the pedestrian would be able to claim against the errant driver's car insurance policy.

Now, do you see the importance of the coverage that a car insurance policy provides?

Third Party Only is the most affordable type of car insurance policy that you can opt for - it is also one of the policy that is typically offered to owners of older cars

First type of car insurance policy - Third Party Only

That brings us to the first type of car insurance coverage in Singapore - Third Party Only (TPO). This is the most affordable type of car insurance policy that you can opt for, and as its name suggests, this car insurance policy's coverage only extends to a third-party.

This is the type of car insurance policy that you should go for if you want to be able to drive on the road with the least amount of spending. In the event of an accident, your car insurance coverage would only apply to injuries and damages done to someone else or their property - you won't enjoy any coverage for your own car's damages.

The next tier up would be Third Party Fire and Theft, which offers additional coverage in the event of fire damage, or the theft of your car

Second type of car insurance policy - Third Party Fire and Theft

If you would like to enjoy a little more coverage, the next tier up from the basic car insurance coverage of Third Party Only adds Fire and Theft coverage - this car insurance policy is also known as Third Party Fire and Theft (TPFT).

A TPFT car insurance policy covers the injuries and damages suffered by a third party. In addition, you would also be covered by the insurance policy in the event where your car has been damaged in a fire or if your car has been stolen.

TPFT car insurance coverage is more expensive than TPO, but it offers the added peace of mind, especially for drivers who frequent road trips across the border (do make sure that your car insurance policy covers the country that you drive to). If the difference in the car insurance premium between TPO and TPFT isn't too great, opting for TPFT would be the recommended course of action.

If you are driving a nice new car, comprehensive insurance is the coverage that you want

The ultimate car insurance policy - Comprehensive

Now, for those that desire the most complete protection from their car insurance policy, Comprehensive car insurance coverage is what they should opt for.

In addition to everything you get with TPFT or TPO coverage, a Comprehensive car insurance policy would also cover you for damages done to your own car - this includes accidents that doesn't involve a second car as well. 

While coverage might differ from one insurance provider to another, most Comprehensive car insurance coverage would even cover damages to your car's windscreen and windows, as well as damage from flood and other natural disasters. Some Comprehensive car insurance also includes schemes that compensates you a replacement new car in the event that your relatively new car (less than a year old) has been damaged beyond repair.

Comprehensive car insurance coverage is the ultimate protection that you can pay for your car, but it does come at a cost. Comprehensive car insurance policies are expensive and can cost substantially more than a basic TPO policy - furthermore the insurance premium could also be higher for older cars. In fact, some cars might not even be eligible for a Comprehensive car insurance coverage.

Brand new car owners are typically encouraged to opt for Comprehensive car insurance policies, and depending on the car loan arrangement, it could even be mandated by the financial institution as a prerequisite to secure the car loan.

How much does a car insurance premium cost in Singapore

Car insurance premium depends on many factors including your age, marital status, years of driving experience, past driving history, type of car, age of car, the type of car insurance policy that you opt for, and many others. As such, the costs for car insurance premium can vary wildly from one person to another.

However, to put a number on it, the average annual car insurance premium in Singapore for a normal economy car would be around $2,000 or so. Hence, if you are budgeting for your first car ownership, you must remember to include the cost for a car insurance policy.

Yes, the need for a car insurance policy adds on to the operational costs of a car. However, apart from being mandated by the government, it also gives you peace of mind while driving on the roads. To find out how much your car insurance policy will cost, you can explore the various insurance providers that have online insurance premium calculators available. Alternatively, you could turn to your car dealer to assist in getting a quote for the various types if car insurance policies before you decide which to go for.