Stopped making car insurance payments? Here are the consequences you’ll face

car insurance payments

Purchasing a car is a big milestone in most people's lives; however, many time, they forget to take into account the real cost of car ownership, which includes insurance, registration, fueling, and maintenance. Out of these four, insurance is the trickiest as it requires proper research and budgeting for premium payments.

KEY TAKEAWAYS

  • Can I get comprehensive insurance for my old car?

    Yes, comprehensive insurance is available for both new and old vehicles, although the premium may vary based on the age and condition of the car.
  • Can I just get CTPL insurance and no other policy?

    Technically, yes. CTPL insurance is mandatory in the Philippines. But remember, TPL only covers injuries and damage to other people and property. You'll be responsible for the financial burden if your car gets damaged or stolen.
  • Can I add or remove add-ons from my insurance policy?

    Definitely! In most cases, you can add or remove add-ons from your insurance wheneve­r you want.
  • How long does it take to process a car insurance claim?

    The processing time for a car insurance claim depends on factors like its complexity, the responsiveness of involved parties, and other factors. Simple claims typically take weeks, while complex ones may require more time.
  • Also Read: Want to buy a car? Here's a complete list of all associated costs

    We have already discussed topics like how to choose a car insurance policy, essential add-ons for car insurance, types of car insurance claims, and how to claim car insurance in the Philippines in detail. Now, it’s time to dive deep and find out what happens if you do not pay car insurance.

    But before that, here’s a quick brush-up starting with -

    What is car insurance?

    A car insurance is a legal agreement made between the motor vehicle owner and the insurance company. Here, the former agrees to pay a fixed amount (at fixed intervals) against which the latter offers financial protection against several risks associated with owning a vehicle. For instance, a car insurance policy offers financial protection in the event leading of car repair, medical express, theft, acts of god, legal liabilities, etc, depending on the chosen policy and the add-ons.

    car insurance payments

    Types of car insurance

    In the Philippines, a motor vehicle owner has the option of the following types of car insurance -

    Compulsory Third-Party Liability (CTPL) Insurance: As the name suggests, CTPL is a mandatory requirement by LTO and is a prerequisite for registration and registration renewal. It also protects the owner from legal liabilities involving physical injury or death caused by him to a third party in an accident.

    Also Read: Compulsory Third Party Liability (CTPL) 101: Everything a car buyer needs know

    Comprehensive Car Insurance: This policy offers extensive protection to the vehicle against non-collision damages, such as those caused by theft, natural disasters, fire, or vandalism.

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

    Personal Injury Insurance: Regardless of the fault, this insurance policy offers financial protection to the driver and passenger against incurred medical expenses, and other related costs.

    Collision Insurance: Regardless of fault, a collision insurance policy covers damages to the insured vehicle caused by a collision.

    Medical Payments Coverage: As the name suggests, this insurance policy reimburses all medical expenses incurred by the driver and passenger.
    Note - The above-mentioned information is generic and it is always advisable to understand all the terms and conditions of the policy, as sometimes a policy is a mixture of two-three policies.

    car insurance payments

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

    Factors to consider when choosing an insurance policy

    Whenever a motor vehicle owner is choosing an insurance policy there are several factors that he/she needs to consider. The list includes -

    • Premium
    • Coverage
    • Add-ons
    • Claim process
    • Deductibles & Excess
    • Premium payment options
    • Policy terms & conditions
    • Insurance provider

    As the list above demonstrates, the premium is one of the most important factors to consider when selecting car insurance. But what will happen if you aren’t able to deposit the premium on time or at all? Let’s find out.

    Scenario 1: Car insurance premium not paid on time

    Often, car insurance providers offer a grace period to their clients, meaning a few extra days beyond the due date for the premium deposit without any penalty or cancellation. So, you still have some time in hand to pay for your car insurance. However, it is advisable to check with your insurance provider if a grace period is part of their policy.

    If your insurance provider grants you a grace period, it means your policy won’t be canceled immediately if you miss a payment.

    What happens when a client misses a due date? A few days after the due date, the company sends him/her an intimation via mail or SMS to pay the premium within the grace period so the coverage doesn’t end.

    car insurance payments

    Scenario 2: Car insurance premium not paid at all

    If a client is unwilling to pay insurance premiums on the due date, during the grace period, or even after that, it would lead to the end/lapse of his/her car insurance policy. In addition, it will also have a bad effect on your overall finances, keep reading to find out more.

    Ill-effects of not paying car insurance on time

    Car insurance getting cancelled

    Everything comes at a cost and so does your car insurance policy, which offers you coverage from several liabilities. To keep such benefits, you need to pay the premium on time. Depending on your insurance provider, the payment could be monthly, quarterly, or annually.

    Under the Insurance Code, insurance companies in the Philippines can legally terminate your policy due to several reasons, one of which is non-payment of premium. Therefore, we advise you to prepare your budget in a manner that includes premium expenses, because losing insurance coverage would prove to be much more expensive in the long run.

    Ways to ensure you pay your car insurance premium on time -

    • Go for an insurance provider that is offering you a better rate
    • Take advantage of the promos and discounts (such as multi-car discounts and no-claim bonuses) offered by the insurers

    Your car no longer enjoys the coverage

    Car insurance provides coverage to protect the vehicle owner from several financial liabilities. However, when a vehicle owner fails to pay the premium, his/her policy gets canceled, and so does the coverage, leaving you with an uninsured car. And do you know driving such a vehicle is so risky? Why?

    First of all, in case of an accident, you’ll have to pay for all the repairs, medical bills, and other expenses out of your own pocket, which can be a lot.

    Next, if your car is involved in an accident wherein it gets severely damaged, and you can’t pay for the repair, insurance would have come in handy, but now you are stuck with a broken car.

    Now, imagine this: if your car is involved in an accident, injuring/killing someone or damaging a property. In such a case, if you are unable to pay compensation, you could end up behind bars. The situation would have been different if your car was insured.

    Negative impact on credit score

    An individual's credit score reflects his/her financial health, so it is important to keep the numbers under check at all times. However, when a person fails to pay a car insurance premium (on time or at all), the score will surely drop.

    Credit Score Ranges and Their Implications

    Do you know how a low credit score affects you? It can make it difficult to get a credit card, loan, home, or other asset.

    You can lose your car

    Yes, that’s true in cases where your car is financed through a car loan. How? Why? Well, throughout the loan term, the lender requires the car owner/borrower to have an active insurance policy. If the policy lapses due to non-payment of the premium, your loan provider will take back your vehicle as you no longer meet the loan prerequisites.

    Increased premium

    If a lender learns that you have failed to make premium payments in the past, they will likely offer you insurance at a higher premium. Why? because you are a high-risk client whom they cannot fully trust.

    Car Registration Renewal in the Philippines

    Can anything be done after you miss paying car insurance?

    Yes, why not? There are a few things you can try to minimise the negative impact of non-payment of the premium. For instance, you can have a word with the car insurance company and discuss ways to resolve the issue and see that the policy doesn’t lapse.

    In certain situations, after the payment of the unpaid premium within a specified period, the company may reinstate the policy or look for a new insurance policy at a cheaper rate.

    In either case, make sure that you do not miss car insurance payments again. We’d also suggest opting for automatic debit functionality, as it nullifies the chance of missing a premium payment.

    Bottom line

    Now that you understand the consequences of not paying for car insurance, don't you think it can mess up your money situation fast? Instead of worrying after your insurance is cancelled, take steps to prevent it.

    Try your best to always pay on time. Make sure you know how your car insurance costs are calculated, read through the policy carefully, and make paying your premium a top priority.

    Also Read: A step-by-step guide on how to claim car insurance in the Philippines

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