Most asked questions about car insurance participation fees in the Philippines — Answered!

If you are a car owner in the Philippines, you must have come across the term ‘participation fee’ from your insurance provider or agent. Now, if you are a seasoned owner, it's okay, but for a first-time owner, this could be pretty confusing. You see, it is essential for every policyholder to understand participation fees, as they can help you avoid surprises when filing a claim.

So, what are participation fees? It is a portion of the repair cost paid by the policyholder before the insurance company shoulders the remaining amount. This fee is charged for a reason—to keep insurance sustainable and to encourage responsible use of claims. We’d also like to mention that many Filipinos confuse participation fees with excess fees or deductibles—but that’s not the case, and we’ll be discussing all that in detail here.

In the Philippines, participation fees are standard with comprehensive car insurance, especially in cases involving vehicle damage or loss. The amount, however, can vary depending on the insured unit’s value and coverage terms.

Before moving on to answer some of the most common questions surrounding the topic, it would be in your interest to first understand how participation fees work. So, let’s begin …

Understanding the working of participation fees

As mentioned above, participation fees help discourage excessive & fraudulent claims and enable providers to manage risks. Its computation is usually based on the vehicle’s insured value or set as a fixed amount, depending on the provider.

Here are some standard computation methods -

• A minimum fixed fee
• A percentage of the vehicle’s value (like 0.5% of the sum insured)
• A special rate for a particular claim

Note: participation fees do not apply to CTPL insurance.

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

Answering the most asked questions about the car insurance participation fee

Question 1. What exactly is a car insurance participation fee?
Answer. A participation fee is the amount of money a policyholder pays when filing a claim under their policy. This fee covers a portion of the car repair cost; the insurance provider pays the rest.

Question 2. Why do insurance providers charge participation fees?
Answer. Insurance providers charge clients a participation fee for several reasons, including reducing insurance abuse, minimising fraudulent claims, and ensuring drivers feel liable for vehicle damage after an accident.

Question 3. How much do insurance providers in the Philippines charge the typical participation fee?
Answer. Participation fees vary depending on provider and policy terms. However, the usual compensation is around 0.5% of the vehicle’s fair value or between PHP 2K to PHP 3K, depending on the insurer.

Question 4. Is participation and a deductible fee the same thing?
Answer. Usually, car owners use the terms participation fee and deductible fee interchangeably. However, that is not the case, as participation fees cover the deductible fee, depreciation fee, or both.

Question 5. How is the participation fee calculated?
Answer. To calculate the participation fee, you first need to compute your deductible fee and depreciation fee. Then, by adding the two, you’ll get the participation fee for your claim.

Question 6. How to compute the deductible fee?
Answer. To calculate the deductible fee on your car insurance policy, multiply your car’s fair market value by 0.5% or 1% (depending on your vehicle and insurer). If the amount is higher than PHP 2,000, that will be your deductible. If not, pay only the minimum deductible fee.

Question 7. How to compute the depreciation fee?
Answer. Depreciation fee can be calculated by multiplying your car repair/replacement cost by the corresponding rate in the depreciation table.

Question 8. Does the depreciation fee apply to a new car?
Ans. The depreciation fee does not apply to vehicles that are 3 years old or less.

Question 9. What factors influence the car insurance participation fee in the Philippines?
Answer. The following factors usually influence your car insurance participation fee: the car’s insured value, vehicle type, age, and coverage.

Question 10. Do policyholders have to pay an annual participation fee or a per-incident fee?
Ans. A policyholder only pays a participation fee per incident; i.e., every time you file a claim, you pay a participation fee. So, if you file multiple claims in the same year, you’d pay multiple participation fees.

Question 11. What are the incidents wherein payment of participation fees is not required?
Answer. You are not required to pay the participation fee when -
Another party’s insurance provider is taking care of the liability
The insurance provider waived the fee
Damage is covered under warranty, with no need to file a claim

Question 12. How do I avoid high participation fees in the future?
Answer. Here are a few tips to avoid high participation fees -

• Choose a policy with lower deductibles
• Practice defensive driving

Question 13. What are the consequences of not paying the participation fee?
Answer. If a policyholder does not pay the participation fee, the claim will not get processed, and you’ll end up paying all the repair/replacement costs.

Question 14. Do I have to pay participation fees even for minor scratches?
Answer. If you file a claim, then yes, you’ll have to pay the participation fee. However, it is recommended not to file a claim for minor damages to preserve the No Claim Bonus.

Question 15. Can I negotiate a lower participation fee with the provider?
Answer. Usually, no. However, it is recommended that you practice your negotiation skills.

Also Read: 10 Factors that determine your car insurance premium

Pros & cons of participation fees

Let us now discuss the significant advantages and disadvantages of car insurance participation fees.

Pros

• It ensures responsible vehicle ownership
• Discourages abusive claims
• Keep insurance premiums affordable

Cons

• Unexpected out-of-pocket expense
• High fees for vehicles located in disaster/accident-prone areas

Tips to minimise participation fees

• Look for an insurance provider offering claim-free benefits or a low deductible.
• Avoid unnecessary claims as they affect your NCB.
• Maintain your car well to avoid accidents due to mechanical or repair faults.
• Compare insurance packages before buying.

Also Read: Think your policy just expired? It might be cancelled — Learn the difference

Bottom line

The above-mentioned question-answer layout will help car owners make smarter financial decisions. While paying participation fees may feel like a burden, they play an essential role in keeping insurance affordable and fair. By understanding how these fees work and how to manage them, you can protect your finances, car, and yourself.

Also Read: How to avoid lapses in car insurance coverage in the Philippines