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What is Car Insurance & how does it work in the Philippines?

Car insurance is first of all required by law before you are allowed to drive your vehicle on a public road. Secondly your car insurance is for your financial protection when you have damages to your car or cause damage to another vehicle. The insurance policy is a financial contract between yourself and the insurance provider, shielding you from major financial loss.

The amount of protection you get from your car insurance policy is determined by the yearly premium that you pay and therefore the options included in your policy. At a minimum it is mandated that all vehicle owners get Compulsory Third Party Liability Insurance (CTPL), which covers death and injury of third parties but minimally covers the driver or it’s passengers. Most vehicle owners are looking for further protection and opt for comprehensive insurance, which compensates the policyholder for financial losses due to physical damage, bodily injury resulting from vehicle collision, theft, fire, or any damage that may arise from incidents in a vehicle.

A responsible vehicle owner should protect themselves from vehicle repair costs, hospitalization fees, and help protect other vehicle owners.

• Property – such as damage to or theft of your car
• Liability – your legal responsibility to others for bodily injury or property damage
• Medical – the cost of treating injuries, rehabilitation and sometimes lost wages and funeral expenses

Why do I need car insurance?

If you don’t have insurance and you crash into a vehicle and it is your fault then not only are you breaking the law but you will need to pay damages for your own vehicle and the repair costs on the vehicle you damaged, which could easily cost over ₱100,000. If you had comprehensive car insurance it would pay for all damages, thus protecting your pocket.

If your car is still under loan and not fully owned, then it is mandated that you get comprehensive car insurance until it is fully paid, which at this point you could choose to opt for CTPL only.

Generally the main reasons why you should have comprehensive car insurance are;

• Covers the cost of repairs or total write-off of vehicle
• Provides medical assistance costs for you and your passengers
• Helps to get your car repaired quicker and back on the road, and sometimes provides a temporary car, whilst you wait for your car repairs to be completed.
• Provides emergency services like ambulance and roadside assistance.
• Assists you with legal proceedings with a third party case
• Additional perks and benefits

Common features of a car insurance policy

• Property Damage Protection

  If you get into an accident and you are responsible, then your insurance policy will financially protect you if you have property damage coverage. Specifically this will cover other people’s car repairs, property damage and other non-human damages. If a case was filed against you, then legal fees would also be covered.

• Bodily Injury Coverage

  This part of your insurance coverage will protect you financially if you hit another person when driving your car. Specifically this will cover medical and hospitalization fees of the other person injured, as well as lost wages, emotional distress damages and any legal fees that may occur.

• Personal Injury coverage / Auto personal accident

  This is for the financial protection of passengers in your car and yourself. Personal injury coverage will financially assist in medical and hospitalization fees for treatment that maybe needed.

• Comprehensive Coverage

  Most of the time it won't be your fault, and is beyond your control. Comprehensive coverage will financially protect you against malicious damage, theft, vandalism, fire, riots and other non-natural events that can damage your vehicle.

• Acts of God Coverage

  Also known as ‘Acts of Nature’ is an available option to add to your insurance, which financially covers you if car damage occurs due to flooding, typhoons, earthquakes and other such natural disasters. As the Philippines is prone to natural disasters, this option is usually a sound investment to add to your car insurance policy.

• Compulsory Third Party Liability (CTPL)

  This is mandated by the LTO upon purchasing a new vehicle or renewing your car registration. CTPL insurance provides death indemnity, bodily injury, and permanent disablement to third parties involved in an accident. However this type of insurance does not provide coverage for vehicle owners or passengers, so if you purchase only CTPL, you are leaving yourself and your passengers open to financial risk, and possibly not being able to get the proper medical attention if an accident occurred.

What are the different types of car insurance?

Before discussing the different types of Insurance policies available it is important to understand the following terms to understand who the policy is giving protection too and who covers the financial costs.

• First Party - The owner of the vehicle, who has purchase the insurance policy
• Second Party - The insurance company providing the policy to the first party
• Third Party - Any party/person involved in an accident with the first party and is making a claim against the first party.

There are currently 3 main levels of car insurance that you can get in the Philippines, all with pretty big differences. See below;

• Comprehensive Insurance with Acts of God - This is the most protected comprehensive insurance you can get, not only does it cover you for third parties accidents, but also yourself and your passengers. You can even file a claim if you damage the car yourself. With acts of nature, you also get coverage for damage caused by natural disasters.
• Comprehensive Insurance without Acts of God - As acts of nature is optional and not required you can get comprehensive insurance, but if your car is damaged by flooding, typhoons or an earthquake you will not be covered by your insurance.
• Compulsory Third Party Liability - This type of insurance only covers the third party people that were involved in an accident with you, it does not cover you for vehicle damage or bodily injury to yourself or passengers.

Comprehensive Insurance vs CTPL Insurance

What are the car insurance add-ons that you should consider?

Some typical ad-ons to your insurance policies are usually increases in financial protection or increased benefits, below are some common examples.

Voluntary Third Party Liability - This coverage protects for indemnities beyond the limits set forth under the CTPL coverage.

Personal Accident Insurance - Financially protects the driver and passengers against bodily injury or death if an accident occurs.

Roadside Assistance - Is usually an optional added service, which provides peace of mind if you breakdown or need a towing service.

Acts of Nature - Provides financial protection if your car was to be damaged by typhoons, earthquakes, flooding, volcanic eruptions or other similar natural disasters.

Loss of use - If your vehicle is under repair you can usually borrow a vehicle for upto 2 weeks, whilst your car is not available to use.

How to get CTPL insurance?

Getting your CTPL is easy and inexpensive, all you have to do is go to Autodeal and purchase online from an insurance provider. Costs are regulated and standardized by the insurance commission. You will need to upload the following documents;

• Original vehicle receipt (OR)
• Certificate of Registration (CR)
• Drivers License
• One other government ID

Once you have received your policy, usually through email, you will print these documents out and upon registration you will present these to the LTO for proof of CTPL purchase.

Cost of CTPL

There is also a vehicle identification fee of ₱90.40 on top of the CTPL premium. So for a private car the cost would be ₱560 + ₱90.40 = ₱650.40

Your CTPL policy will cover up to ₱100,000 in third party-liability as well as the following schedule of indemnities for bodily injury and/or death.

How to get Comprehensive Insurance?

The documents you need for comprehensive insurance are the same as for your CTPL, but if you have already purchased your CTPL, you don’t have to get the comprehensive insurance from the same provider, you can shop around and search for the policy that best suits your needs and wallet. Once again you can research online and purchase your policy online, no need for phone calls or in person meetings.

Cost of Comprehensive insurance

The usual range for comprehensive insurance for cars between ₱750,000 and ₱2m is usually between ₱15,000 - ₱50,000 per year, depending on the car make and model and the type of comprehensive insurance policy and ad-ons that you opt for.

Common Mistakes When Getting Car Insurance

• 1. Not researching online: If you don’t research different types of insurance policy inclusions and their prices, you are setting yourself up to overpay on your insurance premium by ₱5,000 - ₱10,000. Research transparent pricing online and request for at least 2-3 quotes to see the difference.

• 2. Not making payment online: Making your payment online is instantaneous and you get to choose how you pay, whether with cash from your savings account or by using a credit card, and in some cases insurance providers will allow you to pay monthly via direct debit, helping you spread the payments across 1 year, rather than paying the full amount upfront. With digital policies, it’s also much easier to update and add on additional coverage if you want to in the future.

• 3. Only buying the cheapest coverage: A common mistake is for car owners to go for the cheapest insurance coverage, which is basically playing with fire. Imagine if you make that one mistake and hit an expensive car for example, leaving you with a bill for ₱500,000, which doesn’t look like a cheap insurance premium anymore.

• 4. Not being transparent with the insurance provider: It’s really not worth giving a few white lies to get a lower premium as the insurance provider will probably find out through various background checks, and either hit you with a higher premium down the line or when it comes to claiming, reduce your financial protection or void your policy altogether. On the upside if your driving history is good then total transparency can lead to lower premium rates.

• 5. Not opting for additional coverage: Essentials options that you should always consider in the Philippines are Acts of Nature and Roadside Assistance. Make sure you read what is in your standard comprehensive coverage and what additional items you want. Once again this is usually laid out best when purchasing online, and helps you with not missing out on essential insurance ad-on options.

Can you insure old second hand cars?

It is possible to insure second hand cars, but there are a few guidelines to consider;

• Most insurance companies only insure vehicles up to 10 years old, anything older will in most cases not be insurable, or come with a higher premium.
• Any car which costs more to repair than the actual cost of the car is also likely not to get insured. In the case of old cars, parts may not be readily available, and the expense to import parts is too expensive for the insurance company.
• If you have a desirable classic or vintage car, then this will come with a higher insurance premium, and you may need specialist insurance for this kind of vehicle.

How to file a car insurance claim?

If you are in an accident these are the steps you should take to enable your insurance to take care of the financial implications;

• Photographs of the incident, especially damaged parts of cars involved.
• Prepare Documents - OR, CR, Insurance Policy and Drivers License
• It’s not always essential but sometimes you will need a police report and or sketch.
• Contact information of the third party
• There maybe other documents if hospitalization or death occurs, but the above procedures are what you need to get started with a claim.

How to renew your car insurance?

First of all you need to know your insurance renewal schedule and two months beforehand, start researching other possible options. Services like AutoDeal Insurance will automatically send you renewal quotes from which you can choose from. Research online and get some more quotes, and once you have those quotes you can always go back to your current provider and see if they can match or beat it, normally they can.

Common Insurance Terms