Cheap car insurance: Smart savings or a costly mistake?

Getting a car insurance policy is a staple for every car owner in the Philippines. Not only is it a legal requirement, but it also offers the insured financial protection and peace of mind.

What is car insurance? A contractual agreement between the policyholder (in this case, the car owner) and the insurance company, wherein, against a monthly payment (called premium), the former transfers the financial responsibility of loss due to an accident or other circumstances to the latter.

If you are new to the whole car insurance scene in the Philippines, then this article is a must-read for you. As there is a chance of you getting honey-trapped by cheap car insurance offers. Furthermore, check out the latest blog here, wherein we have answered the top car insurance concerns of an auto insurance seeker in the Philippines.

Also Read:  No car insurance? Here’s where everything can go wrong in the Philippines

Before hopping onto the concerns or truth behind cheap car insurance, you need to get a brief idea about the auto insurance scene in the country. Why? Coz only with the right knowledge will you be able to better understand the related problems.

Car insurance in the Philippines

When talking about car insurance in the Philippines, here are a few coverage options an insurance seeker must know.

Compulsory Third Party Liability (CTPL) Insurance

 

Compulsory Third Party Liability (CTPL) Insurance is the primary coverage in the auto insurance books. This one is mandatory by law and ensures that the car owner can financially compensate others for injuries caused due to their fault or negligence.

Key aspects -

• It helps pay for medical expenses, legal fees, rehabilitation costs, and other expenses in cases where the insured (car owner) is responsible for causing an accident that results in injuries to others (third party).
• The coverage amount is subject to sub-limits per occurrence or any one occurrence, regardless of the number of claims.

Also Read: Compulsory Third-Party Liability Insurance (CTPL) vs. Comprehensive Insurance: What's best for you?

Comprehensive Insurance

 

Unlike CTPL insurance, which offers coverage against legal liabilities for third-party bodily injuries and /or death, comprehensive insurance offers protection to the insured and his/her car in various scenarios.

Key aspects -

• It offers coverage against damages to the insured car arising from collision and non-collision incidents, for instance, theft, natural disasters, vandalism, fire, animal collision, and falling objects.
• It offers the insured compensation for repair and replacement costs of the insured vehicle. The compensation amount is usually calculated as follows: car’s actual value - depreciation.
• It is usually optional coverage; however, in case of a loan or lease contract wherein it is often required by the lender to protect their financial interest.

Also Read: Is collision insurance right for you? Here’s what you need to know

Passenger Personal Accident Coverage

 

This particular coverage offers financial protection to the driver and passengers in case of an accident that results in bodily injury and/or death while boarding, riding, and getting off the insured vehicle. It also covers partial and permanent disablement.

Also Read: Passenger safety: What does your car insurance cover in an accident?

Roadside Assistance Insurance

 

This insurance coverage offers help/ emergency services that are just a call away. This service is pretty useful when the insured vehicle encounters an unexpected breakdown or roadside emergency. Available services include towing, lockout assistance, jump-starting a dead battery, fuel delivery, and tyre change.

Also Read: Roadside assistance coverage: Meaning, benefits, services & more.

Now that you have a brief overview of car insurance in the Philippines, you need to do the following -

• Obtain car insurance quotes online. Here’s how.
• Select a good car insurance provider.
• Choose the right insurance policy that suits your needs and falls within your budget.
• Do the necessary once the auto insurance is sorted.
• File a car insurance claim when needed. Here’s how.
• Renew car insurance when it's due; in case you are not satisfied with your insurance provider, you can always switch. Here’s how

Also Read: Car insurance made easy: Tips for new drivers in the Philippines.

Cost of car insurance

CTPL cost

 

As mentioned, CTPL insurance is mandatory for all vehicles in the Philippines. As for its price, it depends on the insurance provider you pick. Typically, the cost ranges between PHP 300 to PHP 1709 or more annually. Factors that influence the cost are -

• Insurance provider
• Type of vehicle (car, SUV, utility vehicle)
• Old or new vehicle

Comprehensive insurance cost

 

Coming to the optional but recommended comprehensive insurance policy, it costs substantially more due extensive coverage it offers. Depending on the client's requirements, it can cost anywhere between PHP 10,000 and PHP 100,000 or more annually. The table below gives a brief idea of the cost of insurance based on the vehicle type.

Basic, affordable car	Less than PHP 10,000 annually
Mid-tier vehicle	PHP 10,000 to PHP 20,000 annually
Luxury vehicles (Land Rover, Mercedes-Benz, Audi)	More than PHP 100,000 annually

Too much? Here are a few ways to reduce car insurance costs, including

• Compare different insurance providers, and pick the one offering the best rates and coverage
• Check out discount offers & loyalty programs
• Bundle policies
• Increase your deductible
• Opt for cheaper cars
• Eliminate unnecessary add-ons

Understanding cheap car insurance

When selecting a car insurance policy, cost is not everything. Never target the lowest premium because the right policy brings so much to the table that it fully justifies the cost. Remember, with the right insurance policy in hand, you’ll get to experience the following benefits -

• Safeguards your investment (i.e., car) against damage, theft, fire, etc
• Ensures comprehensive protection at the time of need
• Secures peace of mind

Therefore, it is advised to prioritize coverage over cost, as a good insurance policy is like a sturdy fortress that shields your assets from unexpected events. We’d say, when detecting a car insurance policy, don’t look for affordability alone, but rather see its ability to offer robust coverage.

One must remember that while navigating the sea of car insurance providers, you’ll for sure come across lucrative low-cost insurance options, but remember the cheaper the offer, the higher the associated risk like - compromised protection.

So, for long-term financial security and peace of mind, always go with a reputable provider like

• Oona Car Insurance, click here for a detailed review
• SGI Car Insurance, click here for a detailed review
• Malayan Auto Insurance

Drawbacks of choosing cheap car insurance

There’s not just one but several disadvantages of opting for car insurance with a low premium. While it might seem promising and lucrative at first, the reality is far different from that, and in times of need, such a policy will leave you high and dry.

The table below highlights some of the major drawbacks of a cheap insurance policy -

Limited coverage	Such insurance providers mostly offer minimal coverage, leaving the insured vulnerable in case of accidents and unforeseen events
High deductibles	This requires the insured to pay a high amount from their pocket before insurance kicks in. Thus putting a lot of financial strain in the event of a claim.
Non-compliance with prescribed rates	Insurance providers that offer premiums that are not on par with the rates set by regulatory authorities are a big no for the following reasons - It represents insufficient reserves and financial instability on the part of the insurance provider It could lead to delays or difficulties in receiving payments It is an indication of unethical practices or claim denials on the part of the insurance provider  Exposing the insured to greater financial risk - inadequate coverage and little recourse No adequate protection in case of an accident or emergency
Near to no customer service	Such insurance providers give no priority to customer service - no assistance when you need it the most. Here are a few drawbacks you’ll face in this regard - Challenging accessing the support lines and receiving timely assistance Add stress to an already difficult situation You’ll not be able to ask for help or raise concerns on social media platforms as such insurance providers are mostly unresponsive or absent from such platforms
Risk of underinsuring	When you choose a car insurance provider with low premiums, it usually translates to underinsuring your vehicle. This has its drawbacks - Severe financial strain in the form of extensive medical bills, property damage, and legal fees Insured personal assets are at risk  Adds stress and anxiety to an already difficult situation  It may impact your car and your healing journey due to the struggle of paying for necessary repairs and medical bills Hinders your ability to negotiate with the third party, thus prolonging settlement
Legal complications	In case your auto insurance policy fails to meet the minimum requirements set by the law, you will be in trouble. Get ready for Hefty fines, license suspension, and legal action against you Being liable for all repair, replacement, and treatment costs  Hindering your ability to defend yourself in case of a legal proceeding  Possibly ending up in a prolonged and costly legal battle Damaging your reputation in the eyes of law and stakeholders (lenders, employers, and business partners)
Higher out-of-pocket expense	In the event of an accident, a cheap policy won’t help much and would lead to a lot of stress. Here, you will end up facing.  High deductibles or inadequate coverage  Substantial expenses, far exceeding the amount saved on premium Unexpected financial hardships - hefty repair bills, medical costs, and legal fees Affects future financial stability  Affects your overall well-being and quality of life
High chances of denial	Increased chances of claim denial  Stricter eligibility criteria  Chances of sudden policy cancellations
Slow claim processing	Insurance providers with low premiums often compromise on service quality, which ultimately affects the speed of the claim process. This creates the following problem for the insured - Adds to frustration, stress Delays necessary repairs and/or replacements Affects your work and family responsibilities Puts a lot of financial strain on you if your vehicle helps you earn

 

Bottom line

Remember, people, when out there to choose a car insurance policy for your beloved car, always, always, choose quality over cost. Yes, a cheap policy might seem lucrative at first, but in the long-term, you’ll end up realising the harsh reality - full of hidden pitfalls translating into substantial financial liabilities.

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