Should you insure your old car? Let’s find out

Owning an older vehicle in the Philippines has unique considerations, particularly regarding insurance. With many older cars still on the roads, Filipino drivers often face the dilemma of whether or not to continue insuring their aging vehicles. The decision involves evaluating factors like the car’s value, usage, and potential risks.

We here at Carmudi will explore every nook and cranny of insuring an old car, thus helping you decide whether it is worth it or not. But first, let’s go through the basics of car insurance.

Understanding the basics of car insurance

In the Philippines, there are two primary types of car insurance: Compulsory Third-Party Liability (CTPL) and Comprehensive Insurance.

CTPL: This is required by law and covers third-party injuries or deaths caused by the insured vehicle. It does not cover damage to your car or medical expenses for you or your passengers. CTPL is inexpensive, typically costing around PHP 650 for private cars.

Comprehensive Insurance: This offers wider coverage, including damage to your vehicle, theft, natural disasters, and third-party liabilities. The cost varies based on factors like the car's make, model, and age, and can range from PHP 15,000 to PHP 50,000 annually.

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

Comprehensive insurance When it makes sense & when not

When it makes sense -

Although comprehensive insurance might seem unnecessary for an old car, there are situations where it could be beneficial, for instance.

• Frequent usage: If you rely on your old car for daily transportation, especially for long commutes, maintaining comprehensive insurance might be wise. This is particularly important if replacing or repairing the vehicle would be financially burdensome.
• Risk of natural disasters: The Philippines is prone to typhoons, floods, and earthquakes. Acts of Nature (AON) coverage can be a crucial add-on to protect your vehicle from damage caused by these calamities. If you live in a high-risk area, this coverage could be worth the investment, even for an older car​.
• Costly repairs: Some older cars, especially foreign models, can have expensive replacement parts. If your car falls into this category, comprehensive insurance could save you from unexpected repair costs​.

When it is not worth it -

On the other hand, if your car is mainly used for short trips or as a backup vehicle, comprehensive insurance might not be necessary. In such cases, the applicant can only consider going forward with the legally required CTPL insurance.

Additionally, if the cost to repair your vehicle is relatively low and you can afford to cover small accidents out of pocket, you may not need comprehensive coverage. Older vehicles often don't justify the same level of protection as newer cars, especially when considering the depreciation factor.

Also Read: Why comprehensive insurance is vital for car owners in the Philippines

Alternatives to comprehensive insurance

If the costs of comprehensive insurance seem too high for your old vehicle, there are alternative options that offer some level of protection without the full coverage.

Personal accident insurance: If an applicant’s primary concern is medical expense coverage in the event of an accident, a personal accident add-on to CTPL could be a worthwhile investment. This ensures that medical costs are covered, even if the vehicle is old and not worth insuring comprehensively.

Acts of nature coverage: For car owners living in areas prone to natural disasters such as floods or typhoons, acts of nature coverage is an essential add-on, even for older cars. This option protects your vehicle from damages caused by natural disasters, which are common in the Philippines.

Also Read: Exploring essential add-ons for car insurance in the Philippines

Factors to consider before insuring your old car

​Depreciation: As cars age, they depreciate significantly in value. Insurance companies assess claims based on the “fair market value” of your car at the time of an incident. This means the older your car, the less you stand to receive from an insurance payout. If the repair costs approach or exceed the value of the car, insurers may not find it worthwhile to cover the vehicle.​

Maintenance: Maintaining an older car properly can also affect your insurance decisions. Regular upkeep not only ensures that the vehicle remains roadworthy, but can also reduce the risk of accidents or breakdowns. However, if your car is in poor condition and frequently breaks down, you might find that the insurance costs, deductibles, and out-of-pocket repairs outweigh the value of keeping the vehicle insured.

Risk: Insurance companies evaluate the risk of insuring an older car based on several factors. For instance, the vehicle’s age (older cars are more likely to experience breakdowns and may have outdated safety features), driver’s history (any prior accidents, claims), and area where the car is driven (if driven in high-risk areas with a history of accidents or theft, the premium for insuring an older car might increase).

Modifications: Modifications to the vehicle can also affect the insurance premium. For example, if your older car has been modified with after-market parts, such as performance enhancements or non-standard equipment, the insurer may either increase the premium or refuse to cover those parts​. Remember, it is crucial to declare any modifications to your insurer to avoid voiding the policy.

Insurance providers: Many insurance companies in the Philippines offer policies tailored for older vehicles, with options to customize your coverage based on specific needs. For instance, the applicant might choose to forgo collision coverage if the car has little market value or could add roadside assistance if the vehicle tends to break down frequently.

Cost of insuring old cars

One of the biggest concerns for owners of older vehicles is the cost of comprehensive insurance. Now, the premium depends largely on the value of the car, which typically decreases over time.

For cars in the PHP 750,000 to PHP 2 million range, comprehensive insurance costs between PHP 15,000 and PHP 50,000 annually​. However, for much older vehicles, especially those over 10 years old, the premiums can still be relatively high, while the payout during a claim might not justify the expense.

When insuring an older car, it’s crucial to evaluate whether the premium cost is proportionate to the current value of the vehicle. Some experts suggest that if your car’s insurance premium exceeds 10% of the vehicle’s market value, it may not be worth investing in a fully comprehensive policy. In the case of old cars, a minimal policy that covers legal requirements and third-party liability might be more cost-effective.

Additionally, it’s important to factor in the wear and tear of the vehicle. Older cars tend to require more frequent repairs, which could raise the overall cost of maintaining the car. While comprehensive insurance might cover some of these repairs, a high deductible or limitations on coverage for older parts might leave you paying out-of-pocket for some repairs​.

Also Read: Your guide to car insurance payment options in the Philippines

Exclusions for old car insurance

As cars age, insurance companies may impose certain exclusions or limitations on coverage. For example, some policies might not cover mechanical breakdowns, wear and tear, or issues related to aging parts.
Insurers might offer a lower payout in the event of a claim, based on the car’s depreciated value

Insurers may require a higher deductible for older vehicles, meaning you’ll need to pay more out-of-pocket before your insurance coverage kicks in.
If your vehicle is prone to frequent repairs, these higher deductibles can make it challenging to rely on insurance to cover all costs.

Top questions to ask when insuring your old car

When thinking of insuring your old car, it is advisable to ask yourself the following questions -

#1 How often do you drive the car?

If you use the car frequently, comprehensive insurance can provide peace of mind. For a weekend or occasional vehicle, basic coverage may suffice.

#2 What’s the car’s value?

Compare the annual premium with the car's market value. If the premium is too high relative to the value, it may not be worth it​.

#3 Where do you park the car?

If you park in a secure location, you might not need coverage for theft or damage. But if the car is regularly exposed to risks like vandalism or bad weather, insurance could still be a good investment

Mistakes to avoid when insuring an old car

Many car owners make the mistake of opting for the cheapest insurance without considering the risks. While this might save money upfront, it could lead to substantial financial losses if an accident occurs. Transparency with your insurer about the vehicle’s condition is also essential to avoid claim denials​.

Bottom line

Every car owner’s situation is unique, and the decision to insure an older vehicle should be based on personal financial circumstances, how much the vehicle is relied upon, and the specific risks it faces on the road.

Also Read: Filing car insurance claims in the Philippines: Coverage to consider in case of an accident