It’s time for you to renew your comprehensive car insurance soon, and you are excited to drop your full coverage premium for a much affordable one. However, before you do that, there are a couple of things that you need to know about.
There are several reasons why you currently have full comprehensive car insurance. It is either because it’s your personal choice or because of other factors. Either way, full coverage car insurance is a great choice except for the fact that it can be quite expensive.
In most cases, it is not a good idea to drop your comprehensive car insurance despite the fact that you will be paying a lesser premium. Unforeseen circumstances can happen on the road. With a minimum TPO insurance, the damage sustained on your car will not be covered by the insurance. This can set you back with a significant financial burden, which may make you regret your decision to take up a TPO plan.
When to Drop or Should Not Drop Your Full Coverage Car Insurance
Here are some factors that you need to think about before deciding on dropping your full coverage car insurance:
Age of the Vehicle
It is important to take note that the value of your car will depreciate over the years. With this in mind, dropping your full coverage insuranceis a good idea when your premium is worth 10% more than the book value of your car.
For example, your car is at a point where its book value is $4000, and your comprehensive insurance premium is $400 yearly. You might want to consider dropping it because you will be unable to collect more than your car’s market value.
If a bank or dealership is financing your car, you might want to rethink your choice of dropping your full coverage car insurance. Often, these lenders will require you to have more insurance coverage.
If you do decide to drop it and wreck the vehicle, you will be paying for repairs and payment to the lender out of your own pockets.
It is illogical to keep paying for comprehensive insurance when you cannot afford it in the first place. If you face more financial hardship, you may even miss some payment, which may result in the forfeit of your benefits when you need it.
When it comes to car insurance, the rule of thumb is that you pick an option that you can afford and help reduce financial hardship if something terrible happens.
Other Types of Car Insurance
If you are really firm about dropping your full coverage car insurance, you may want to know about your other possible options. Here are some options:
Third-Party Only Insurance (TPO)
Among all the car insurance options out there, this one is the most affordable. Third party only insurancecoversinjuries to third parties and death on top of property damage. However, it will not cover the damage to your own car.
Does it sound confusing? If it does, here’s an example; you got into an accident with another car. You and the driver of the other car both have TPO insurance. What will happen is that your insurance provider will pay for the damage you cause to the other person’s car while the other driver’s insurance provider will be the one paying for the damages done to you.
TPO insurance is the most basic level of car insurance that covers basic liabilities, and it is something that is offered by most car insurance providers in Singapore. However, it is important to take note that TPO insurance claims are only released once it is proven that you are at fault.
Third-Party Fire and Theft (TPFT)
This type of insurance covers the damage you have caused to another vehicle or property and, at the same time, your own vehicle as well – but only when the damage is caused by fire or in case of theft.
It covers the damages caused to your vehicle if a fire occurs. At the same time, if you fall victim to theft, your car will be fully covered.
When you compare the two-insurance mentioned above against a full coverage car insurance, the full coverage insurance is obviously the better choice. It covers all that’s under the Third Party Only Insurance and Third Party Fire and Theft insurance. The wider range of coverage is one of the reasons that attribute to its higher price.
It is easy to say that the best type of car insurance is comprehensive car insurance, but it is understandable why you are considering other alternatives but go for it only in case of any one of the above-mentioned scenarios.
Ensure that when you opt for a cheaper car insurance premium, you will not spend more in case you get into a bad situation. It is also essential that if you do decide to keep your full coverage premium, you should consistently pay for it until the end of the contract. Ensure this is the case so that you keep a good credit reputation.
If you need professional assistance in deciding what car insurance is best for you, get in touch with Insurance Market Singapore. We will be more than happy to provide you with options that fit your needs and budget.
Insurance Market offers a wide range of general insurance products (such as Travel Insurance, Maid Insurance, Pet Insurance, and more) online and life insurance through personal advice from our qualified brokers. Please contact us at [email protected] or +65 69081811 if you have any questions.