Ever wondered how car insurance is calculated? What are the factors that is behind the calculation? Why is it that 2 different persons driving the same car can get such a huge difference in their insurance premium?
According to the General Insurance Association Singapore, insurance companies use an assessment system called the Risk Factor Rating System. In simple terms, what the Risk Factor Rating System does is to put together multiple factors to evaluate the risk of insuring your vehicle. The higher your risk, the higher the car insurance premium.
In this article, we will be discussing the various factors affecting your car insurance premium. There’s 18 of them so let’s cut to the chase and dive right into the details to find out what are the factors that may affect your car insurance premium.
1. Make and Model
Generally, cars with a higher engine capacity, higher horse power and car models that have higher accident rates will end up with higher premiums. This is the reason why the insurance of sports cars is so expensive. Additionally, the cost of the parts of the insured car model also plays a part in your insurance premium as well.
2. Age of the Car
Normally, as the car turns older, the lower the insurance premium. But this is only up to the first COE ends which is 10 years. After 10 years, the premium will start to go up because higher risk of technical faults that may cause accidents and parts may be more difficult and expensive to get.
3. Usage of Vehicle
Certain usage have higher premiums. If the insurers think that you will be driving regularly or have additional potential risks, they will charge a higher or extra premium. For example, private hire cars and commercial vehicles with tailgate or are in the courier and logistics industry.
4. Age of Driver
Drivers between 30 to 60 years old normally get better insurance premium. This is because it is believed that if one is under year of 30 years old, he or she may not be as experienced and may have a higher tendency to drive like Dominic Toretto (Fast and Furious). As for above 60 years old, eye sight, response speed and health poses as an additional risk although they are very experienced drivers.
5. Marital Status
Although it is not known how accurate this is but the system believes that if a person is married, he or she tends to be more responsible in driving. Therefore, they get to enjoy cheaper premiums for their car insurance. So does this gives us another reason to get married?
6. Gender
This is the point that some people may argue or disagree but it does seem like the ladies are enjoying a lower premium because the impression of them is that they are a safer driver than the guys. Guys, please do not shoot us. We are just stating from our experience.
7. Experience
One thing troublesome about quoting car insurance is that they will ask when did you pass your driving license. Who remembers the date right? But they do this for a reason. Because there is no other way to prove how experienced you are in driving, they use the license passed date as a benchmark. The longer you passed your license, the lower risk points you will score and that may help you get a lower and cheaper premium.
8. Occupation
Many times, insurers also ask if your occupation requires you to be indoors or outdoors. The reason why they ask is because if your occupation is outdoor, it means you will have a longer period on the roads which leads to a high possibility of an accident.
9. Demerit Points Accumulated
Not all but some insurers do take this into consideration. If you are free from demerit points for the past 3 years, some insurers give additional discount on the insurance premium.
10. Claim History or Impending Claims
If you have been previously claimed by a third party, your car insurance renewal is definitely going to increase as well. Even if you were to switch to another insurance company, the insurance premium will still be high. Insurance companies share a central database for claims so it is unlikely that the other insurance company is unaware of your claims.
If you have an impending claim, you may be quoted and charged with a higher premium to renew your insurance first. After you have settled the claim and if you are proven that you are not liable for the impending claim, it is possible to request for a refund of the difference in the premium.
11. Type of Coverage
This is the easy part. The lesser the coverage, the cheaper the premium. So, the premium for a Third Party Only (TPO) coverage is definitely a lot cheaper than a Comprehensive coverage because it does not cover own damages.
Do take note that if your car is still under hire purchase, you may not be able to choose the lowest coverage. At the very least, your policy has to cover fire and theft. This is to protect the hire purchase company.
12. Insurance Excess Amount
Excess is the amount that you will pay from your pocket for your own damage repairs in the event of an accident. For example, if your repair bills amounted to be $3,000 and your excess amount is $500, this means that you need to fork out $500 from your own pocket and the insurer will pay the remaining $2,500. This is one of the ways insurers do to minimize abuse of the policy.
So naturally if you choose a higher excess, Insurers will be more than willing to give you a lower premium since you have helped them reduced a huge part of their risk.
13. Workshop Selection
Another factor that will affect your car insurance premium is the selection of workshops. Typically, there are 2 types of plans (Any Workshops or Authorized Workshops) to choose from. The “Any Workshop” plan allows you to go to any of your preferred workshop to repair your vehicle in the event of an accident. The “Authorized Workshop” plan requires you to go to the authorized workshops appointed by the insurers ONLY to do any accidental repairs.
The reason why Any Workshop plans are more expensive because of a number of abuse or misuse cases in the past. This is also why many insurers prefers you to take up their Authorized Workshop plans and go to their appointed workshops. To encourage drivers to take that up, they charge a lower premium for it.
14. Named Drivers
Insurers normally have additional excess if you are not the person driving the vehicle. For example, if your excess is $500 and the additional excess for unnamed driver is $500 and your friend drives your car and hits something. In total, the excess will be $500 + $500 = $1,000. Note, this is just an example. Every insurer has a different additional excess for unnamed drivers and to avoid this, some drivers add named drivers into the plan but it also means higher premium.
15. NCD Protector
NCD Protector is something that protects your NCD. In short, this protector allows you to keep your hard earned NCD in the event of any claim. If you have accumulated 50% and wish to protect it, this is a good option. But you have to pay a slightly higher premium for it. You can also read more about NCD and NCD protector here.
16. Off Peak Cars
Besides the huge discounts on COE and road tax, off peak car owners also enjoy lower insurance premiums because the duration of them on the roads is very short. Lesser time on the roads = Lower possibility of accidents.
17. No Claim Discounts
Every year, drivers can accumulate a no claim discount (NCD) as a form of a reward for safe driving. If there are no claims on their policy during the insured year, they accumulate no claim discount every year. No claim discounts can be accumulated to up to 50% for private cars and 20% for commercial vehicles.
18. Loyalty Discounts
Some insurers offer it’s loyal customers who have been with them for years an additional loyalty discount on top of the NCD that you are enjoying. This way, they get to keep you as a customer and you get to enjoy cheaper premium. It is definitely a win-win for both parties.
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Still reading? Impressive!!! Give yourself a pat on the shoulder for reading till this far. We hope that the information in this article provides you with an understanding of how and why each factor affect your car insurance premium.
Do note that based on the statistics and past claims information acquired, every insurer will give a different weightage to each factor. Therefore, not all insurance companies will come up to a same premium amount for your insurance renewal.
Lastly, if your car insurance renewal is due soon, please feel free to submit your details through our car insurance renewal quotation page to receive competitive quotations for your renewal. We have a network of insurers who we work with. After receiving your particulars, we will get a few quotations from them to compare and send the lowest to you to shorten your sourcing journey.
Even if your insurance is not due, you are welcome to key in your details here. What we will do is to automatically get the quotes from the insurers and get in touch with you nearer to your car insurance renewal due date.
Once again, thank you for reading and we really appreciate your time. We hope to be able to share more information to benefit car owners like yourself. Do check out our other articles in our blog page.
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