Dealer or third-party car insurance provider: The better choice

When purchasing a car in the Philippines, insurance is essential to protect your vehicle from accidents, theft, and natural disasters. Buyers often face a dilemma: Should they opt for dealer-provided insurance or a third-party insurance provider? Understanding each option's advantages and disadvantages will help you make an informed decision.

Here we have discussed the key differences between dealer-provided and third-party car insurance in the Philippines, their respective pros and cons, and what might work best for different kinds of drivers.

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

Understanding dealer-provided insurance

Dealer-provided insurance refers to the car insurance offered directly by the car dealership at the time of purchase. This option is attractive for its convenience, as it allows buyers to bundle their insurance with the car purchase. Some of the major dealerships in the Philippines, like Toyota with its "Toyota Insure" program, offer their exclusive insurance packages.

Advantages of dealer-provided insurance

Convenience

The primary appeal of dealer-provided insurance is that it streamlines the buying process. Everything can be handled in one place—there's no need to visit multiple insurance companies or agents. This is ideal for those who value time and prefer a one-stop-shop experience.

Partnership with insurance provider

Car dealerships often have exclusive partnerships with certain insurance companies. This means the dealer might be able to offer additional perks, such as using genuine parts for repairs or ensuring quicker claim processing through their partner providers.

Simple claim processing

Since the dealership often facilitates the claims process, particularly when the damage is to your own vehicle, filing a claim may be easier and quicker through dealer-provided insurance

Comprehensive coverage options

Dealerships usually offer insurance plans that cover a wide range of incidents, such as theft, damages from natural disasters, and road accidents. These comprehensive plans often include perks like roadside assistance or towing services

Disadvantages of dealer-provided insurance

High premiums

One of the major drawbacks of dealer-provided insurance is its cost. Due to the convenience it offers, dealerships often charge higher premiums compared to third-party providers. The bundled pricing can sometimes result in less favorable terms than what you could negotiate separately.

Limited flexibility

Dealer-provided insurance policies might have less flexibility in terms of coverage adjustments and add-ons. You are typically bound to the options available through the dealership’s insurance partners.

Bias toward some providers

Since dealerships partner with specific insurance providers, you may not have the ability to shop around for better deals or services. This could limit your ability to find an insurance plan that perfectly fits your needs

Also Read: Understanding car insurance cost in the Philippines in 2024

Understanding third-party insurance providers

Third-party insurance providers refer to independent insurance companies that are not affiliated with the dealership. Some of the popular third-party providers in the Philippines include OONA Insurance, FPG Insurance, and Malayan Insurance. These companies offer comprehensive insurance packages and additional benefits, often at competitive prices.

Advantages of third-party insurance providers

Low cost

One of the most significant benefits of going with a third-party insurance provider is the potential cost savings. Since the applicants are free to shop around, they can compare premiums and choose the provider offering the best value for money. Third-party providers often have more competitive rates than dealer-provided options​.

Flexibility in coverage

Third-party providers usually offer more flexible coverage options. You can customize your policy by selecting the coverage and add-ons that best suit your needs. Whether you want protection against acts of nature or additional personal accident coverage, third-party insurers often have more options.

Specialized services

Many third-party insurers specialize in services like 24/7 roadside assistance, towing, and accident recovery. These specialized services can be an advantage when you need immediate help, which some dealer-provided policies may not offer as comprehensively.

More options to choose from

With third-party insurance, you are not limited to one or two providers. You can select from a wide range of companies, each with different packages and premiums. This allows for better customization of your insurance plan​.

Disadvantages of third-party insurance providers

Tedious task

Going with a third-party provider requires more research and effort on the part of an applicant. They’ll need to compare multiple quotes, evaluate the reliability of different insurers, and ensure that they choose the best provider that meets their coverage needs. However, using online comparison tools can simplify the process.

Separate claim handling

While some third-party providers offer assistance in processing claims, the applicant may not get the same level of support that he/she would with a dealer, particularly if the car is getting repaired at the dealership. Third-party insurers may not be as closely integrated with car dealerships, which could result in slower claims processing for specific repairs​.

Dealer or third-party provider Long-term considerations

When deciding between dealer-provided and third-party insurance, it’s essential to think beyond the initial year. Car insurance in the Philippines is typically renewed annually, which means your needs and preferences may change over time.

Increase in premium

Third-party insurers: It’s common for insurance premiums to increase upon renewal, especially if you’ve filed a claim. Third-party providers may offer more flexibility in this regard, allowing you to negotiate or switch to another insurer without penalties.

Dealer-provided insurance: With dealer-provided insurance, the applicant might be locked into renewing with their chosen provider at a potentially higher rate​

Change in coverage

Third-party insurers: As your vehicle ages, you might want to reduce coverage to save on premiums. Third-party providers often allow you to adjust your policy as needed. For example, you might choose to drop certain coverages.

Dealer-provided insurance: Compared to third-party insurers, it might offer fewer options for adjusting coverage, as it is usually bundled into the overall vehicle service package​.

Switching providers

Third-party insurers: Here the applicant can easily switch providers if you're unsatisfied with the service or pricing. The insurance market in the Philippines is competitive, so shopping around each year can yield better deals and coverage​.

Dealer-provided insurance: Switching away here might be more complicated, particularly if your dealership offers incentives for staying with their insurance partners.

Dealer or third-party provider The better option

The choice between dealer-provided insurance and third-party insurance depends largely on your priorities. For instance

• If you’re budget-conscious and want more control over your insurance coverage, a third-party provider could be the better option. Here the applicant can tailor the policy to his/her specific needs and that too at a lower cost. Further, there is flexibility to adjust the coverage as needed.
• If you value convenience and want everything done in one sitting, i.e., car purchase and insurance, then dealer-provided insurance might be worth the premium. It also makes sense if one prefers to have the claims handled directly by the dealership particularly for repairs involving genuine parts.
• If you have a car loan, in that case one needs to check with the concerned bank if a third-party insurance provider is acceptable. Banks may have partnerships with certain insurers, but you can often opt for your own provider with the bank’s approval​.
• If you are a new car owner, a dealer-provided insurance is a popular choice, largely because of the ease of bundling it with the purchase. Many first-time car owners may find the convenience of dealer-provided insurance worth the higher premiums. However, new car buyers should still explore third-party options. Several insurance companies offer competitive rates specifically for new vehicles.
• If you are a second-hand or pre-owned car owner, third-party insurance often makes more sense. As with third-party insurers, one has greater control over the coverage needed and can potentially save on premiums. Also, they offer flexible packages that cater specifically to older vehicles.
• If you are a high-risk driver, Drivers classified as high-risk (e.g., those with previous accidents or young drivers under 25) may find third-party providers more accommodating. As third-party insurers are more flexible in offering insurance to high-risk individuals, though the premiums may be higher. However, some providers specialize in offering competitive rates to these drivers, giving them more options to choose from​. In contrast, dealership-affiliated insurers might be less flexible when it comes to insuring high-risk drivers.
• If you live in flood-prone or disaster areas, then it is recommended that you prioritize comprehensive insurance that includes "Acts of Nature" coverage. While both dealer-provided and third-party insurers offer such coverage, third-party providers tend to offer a wider variety of plans tailored to different environmental risks​. Many third-party insurance companies allow policyholders to add or customize coverage for specific perils, such as floods or earthquakes.

Also Read: Do’s and don’ts of car insurance policy in the Philippines

Dealer or third-party provider Cost-saving strategies

Regardless of whether you choose dealer-provided or third-party insurance, there are ways to reduce your premium without sacrificing coverage.

Bundle discounts

Some third-party insurance companies offer discounts if you bundle multiple types of insurance policies with them, such as combining car insurance with home or life insurance. Bundling policies can lead to significant savings, which is a major advantage of third-party providers​. Similarly, some dealerships may offer discounts on insurance if you finance the car through their affiliated bank or lender.

Telematics & usage-based insurance

Some third-party insurers in the Philippines are beginning to offer usage-based insurance (UBI) policies. These policies rely on telematics systems that track your driving behaviour, such as speed, braking habits, and mileage.

Defensive driving course

Another potential way to reduce your premiums is by enrolling in defensive driving courses. Some insurance companies offer discounts to drivers who complete these courses, recognizing them as less risky. Although not all dealers or third-party providers offer this incentive, it’s worth asking when you’re comparing plans​.

Bottom line

The choice between third-party and dealer-provided insurance depends on an applicant's specific needs and preferences. While dealer-provided insurance offers unmatched convenience and streamlined service, especially when filing claims. Third-party providers generally offer more flexibility, lower premiums, and a variety of coverage options. We’d suggest you take time to compare and choose the option that best fits your driving habits and financial situation.

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