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 the 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 are chances 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, is the primary coverage in the auto insurance books. Mandatory by law, it ensures that the car owner can financially compensate others for injuries caused due to their fault or negligence. It pays for medical expenses, legal fees, rehabilitation costs, and other expenses in cases where the insured (car owner) is responsible for the accident. However, the coverage amount is subject to sub-limits per occurrence or any one occurrence, regardless of the number of claims.

Comprehensive Insurance, which offers protection to the insured and his/her car in various scenarios. It offers coverage against theft, natural disasters, vandalism, fire, animal collision, and falling objects. Furthermore, it offers the insured compensation for repair and replacement costs of the insured vehicle. The amount is usually calculated as follows: car’s actual value - depreciation.

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

Passenger Personal Accident 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 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 prioritise 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. 

Let us now check out some of the major drawbacks of a cheap insurance policy -

Your car coverage gets compromised.

Most budget car insurance policies offer Third-Party Liability insurance. Meaning, if your car gets damaged, the repair and replacement costs will fall on your shoulders. Similarly, if the car gets stolen, flooded, or burned, you get nothing. And god forbid, if you are hit by an uninsured driver, you are left on your own.

Natural disaster coverage gets compromised

Basic Third-Party Liability (TPL) insurance does not offer protection against acts of god, thus leaving you helpless (with no financial backing) if your car gets damaged due to typhoons, landslides, floods, and other natural disasters.  

Stiff claim process

It is often observed that budget insurance policies come along with the following issues: slower claim processing and near-zero customer support. Often, such policies take several weeks or months to get the claim approved. 

Poor customer service

A cheap insurance policy will cut corners on service, so get ready for delayed response, no 24/7 hotline number, along with other fallouts. All this will give you a major headache during an emergency.

Say bye-bye to roadside assistance

With a cheap insurance policy, don’t expect amenities like towing, emergency fuel delivery, and help during a car breakdown.

Hidden fees 

Budget policies have a reputation for surprising you with hidden fees, which come in the form of high deductibles, extra premiums for add-ons which other insurers offer by default, and limited repair shops.

Tips for choosing an affordable but reliable car insurance policy

• Read the fine print. Before investing in a policy, it is crucial to understand the details like deductible, hidden fees, coverage inclusions and exclusions. Here, we’d like you to look at Acts of God/Nature coverage, if you live in a disaster-prone area; if included, it would prove beneficial in case the car gets damaged due to natural calamities.
• Before committing to an insurer, make sure you cross-check the reputation. You can do this by going through the online reviews, enquiring about the claim process, and taking feedback from existing policyholders.
• Make it a point to examine your profile as well. For instance, see where you park, does your locality have a bad reputation for theft, do you drive via a flood-prone area, how much car repair cost can you afford out of pocket, etc. All this will help you weigh the coverage offered against your needs. 
• Compare the extra premium cost with the service cost. An insurance policy that’s PHP 600 cheaper per month might not include towing, roadside assistance, and repair coverage. So, why not give a hundred pesos more each month and get the advantage of these services, which otherwise would cost much more.
• Before finalising an insurer, even an affordable one, make it a point to ask about free/complementary add-on coverages. If your car has a dash-cam or any anti-theft device, do mention it, as it can get you a discount. 

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.  

Also Read: Car Insurance Endorsements: What they are & why they matter