Why the cheapest car insurance plan isn't always the best

When shopping for car insurance, you may be tempted to buy car insurance from the insurer that offers you the cheapest quote.

But while it's smart to scope out your options to make sure you're not paying more on car insurance than you need to be, there's a balance to be found between cutting costs and cutting the coverage you need. There could be circumstances where singlemindedly seeking the cheapest car insurance on the market may end up contributing to your financial, not to mention personal, detriment should things go wrong.

So as you begin the process of seeking the right motor insurance plan to protect yourself and your vehicle, keep in mind that the cheapest car insurance plan is not always the best. Below, we've compiled a list of the sorts of issues you'll want to consider before you settle on a plan.

Will the plan you're considering cover other people in your car?

Some insurers offer consumers ways to save significantly on their car insurance premiums by limiting the number of people covered under the policy. Singlife, for example, offers its cheapest premiums to consumers who agree that their policy will only cover their car when the policyholder is driving it.

On the other end, HL Assurance automatically includes a personal accident benefit for any person in your car. At first glance, the average single millennial buying her first car might doubt the value of paying for coverage she doubts she'll need. And there is some merit to this.

However, we would advise that you look carefully at the terms of your policy before you leap at such tantalising offers. The last thing you would want is to hand your keys to a friend without realising that they're not actually covered by your car insurance plan when driving your car.

Who's covered driving your car?

First, let's discuss who's covered while driving your car. The fact of the matter is that each insurer approaches the question of who exactly is covered driving your car under your policy a little differently, and you'll want to keep your eyes out so that you're not surprised later.

Some insurers, such as FWD, will cover your car no matter who is driving it at the time of the accident (as long as they have a driver's licence) and will not charge you a higher premium for that flexibility. Others, such as DirectAsia, require you to explicitly name on your policy each additional driver other than yourself.

Families in particular, with not only parents but eventually young adult children who may require access to a vehicle, should be very careful to make sure their policy gives them the coverage and the flexibility they need.

Below, we've included a sampling of different insurers' policies regarding who is covered by your plan while driving your car, ordered from most flexible to least. You can find more detailed information about each insurer's policy within their policy document/wording available on their website.

Insurer	Who's Covered While Driving Your Car?
FWD	Anyone you give permission to drive your car (with a valid licence) is covered without having to be named on your policy.
HL Assurance	You in addition to any Authorised Driver named on your policy is covered
Singlife	You may choose varying amounts of coverage including: "Insured only," "Insured & 1 Named," "Insured & Spouse," "Any Driver Aged 30 and Over," "Any Driver 25 and Over," and "Any Driver." Your premium will increase as the scope of who is covered widens.
DirectAsia	Select from among: the cheapest Value Plan (yourself + up to 4 named drivers), the mid-priced Value Plus Plan (yourself, experienced adult drivers aged 30+ with 2 years of driving experience + up to 2 named young and/or inexperienced drivers), and the priciest Flexible Plan (any driver with a valid licence)
Budget Direct	You can select to buy either the cheaper Named Driver Plan, which covers people explicitly named on your policy or the pricier Authorised Driver Plan, which covers anyone you trust to drive your car and all household members you explicitly name on your policy
NTUC Income	You may include up to 2 named drivers on your policy who will be subject to the same standard excess as you; unnamed drivers are covered but will have to pay an additional excess on top of the standard excess. Your premium may change depending on the risk profiles of your named drivers.
Sompo	You may name drivers on your policy who will be subject to the same excess as you, the policyholder/main driver; unnamed authorised drivers are covered but will have to pay an additional excess on top of the standard excess. Your premium may change depending on the risk profiles of your named drivers.
AXA	Policies allow for 1 main driver and 4 additional named drivers covered
Etiqa	You may name up to 4 additional drivers aside from yourself to be covered. Your premium will increase as the scope of who is covered widens.
AIG	You may name up to 3 additional drivers aside from yourself to be covered. Your premium will increase as the scope of who is covered widens.

Does your plan extend benefits to passengers in your car?

An especially important concern for families should be if your car insurance plan extends its personal accident benefit coverage to passengers travelling in your car as well as to yourself. After all, it hardly seems fair if you get in a car accident and your wife or child is permanently disabled while you escape unscathed, yet your car insurance plan refuses to pay out simply because you're the policyholder.

But while some insurers extend their personal accident benefit to passengers or at least offer the option to pay for this benefit, others do not. Below, we lay out each major insurer's personal accident benefit policy for their most basic, or cheapest, car insurance plan so that you can make the most informed choice for your family, listed in order of most generous policy to least.

We also include each insurer's medical expenses cover, as while most insurers extend medical coverage to each passenger, the amount that is covered per person may differ.

Insurer	Personal Accident Benefit for Policyholder	Personal Accident Benefit for Passenger	Medical Expenses Cover per Individual
NTUC Income	S$50,000	S$25,000	S$1,000
FWD	$30,000	S$10,000	S$1,000
Singlife	S$20,000	S$20,000	$1,000
HL Assurance	S$20,000	S$10,000	S$1,000
AIG	S$20,000	$10,000	S$300
Sompo	S$20,000	None	S$500
Etiqa	S$20,000	None	S$200
Budget Direct	Pay extra for S$20,000	None	Pay extra for S$500
AXA Essential	Pay extra	Pay extra	Pay extra

Watch out for your policy excess

Many insurers give you the option to increase your policy excess for a lower annual premium. While this may look like an attractive way to save a few extra bucks, especially given the relatively low chances you'll get into a car accident, we would urge you to exercise caution. If you do get into a car accident, having a high standard excess will mean that you'll need to pay more out of pocket before your car insurance plan's coverage will kick in.

And it's a lot easier to create space in your yearly budget to accommodate a couple hundred dollars for a somewhat higher premium than it is to suddenly find a few spare thousand bucks laying around to put toward the unexpected cost of repairing your car.

Another dimension of the policy excess applies if you happen to be a younger driver. If you're in your 20s, most insurers impose a even higher, additional excess called a Young and/or Inexperienced Driver Excess.

Because of this, you'll definitely want to make sure that you are aware of the age under which your insurer considers you to be eligible for this additional fee, as each insurer has a different stance as to who exactly is considered "young" and a particularly high risk, and how much you'll be liable to pay if you do fit into that category. Our team at ValueChampion compared the young driver excesses at a variety of Singapore's top car insurance providers so that you can compare each policy to your situation and pick a plan that's right for you.

Other things to look out for

In addition to what has already been discussed, there are any number of special situations in which what may be the best cheap plan for another driver may not be the best plan for your individual circumstances.

Below, we'll explore a few of these scenarios so you have an idea of the sorts of things you'll want to think about.

• Do you need to use your own workshop for repairs? As a rule of thumb, if you drive a luxury car, a continental car (aka one manufactured in Europe), or some other relatively exotic car in Singapore, the average insurer- authorised workshop may not immediately have the potentially more specialised or sophisticated spare parts needed to repair your car on hand. If you need to wait longer than the loss of use benefit in your policy accommodates for the necessary car parts to be procured to repair your car, you could find yourself driven to considerable inconvenience and expense as you arrange for alternative transportation. If one of these scenarios applies to you, it's probably a good idea to invest in a slightly pricier car insurance plan to safeguard yourself against this kind of hassle.
• Consider investing in an NCD Protector feature: To help you protect against the risk of losing 30 per cent off your NCD and paying more on your premium over the next few years after you file an at-fault claim, many insurers offer the option to pay for an NCD protector feature that will prevent your NCD from dropping even if you file an at-fault claim — and some even include this feature for free for customers already rocking a high NCD. If you've worked hard to earn your 50 per cent NCD and don't want to worry about having to pay a lot more on car insurance next year if you get into a crash, this could be a feature that could save you hundreds of dollars over the next few years, more than paying for itself.
• Is your car modified? Did you know that not all insurers will cover you if you've modified your car? Some may not insure a car with modifications at all, even if these mods are approved by the LTA, while others may require that you declare any modifications at the time that you purchase your policy if you want them to cover you. In any case, if you do have any car mods, it is absolutely essential that you be very clear before you buy your policy that you will be covered, even if you end up having to pay a higher premium. It's better to be safe than sorry.
• Are you covered in the event of extreme weather events? You may be surprised to learn that while many — even most — insurers include coverage for damage caused by natural weather events such as floods, storms or high winds, some of the cheapest plans on the market may not. While you may think the odds your car is significantly damaged by flood are low, keep in mind that flooding is not at all uncommon in tropical Singapore, and at the very least you should be aware of the level of precautions you should take should you buy a car insurance plan that does not cover flood damage.
• Be cautious of purchasing cheap Third Party car insurance You may feel tempted to purchase only the amount of insurance required to legally drive in Singapore, aka a plan that only covers the cost of any liability you owe the other party involved in a crash. However, unless the value of your car has already depreciated so much due to age, wear and tear that it's worth next to nothing, we would not recommend this course of action. It's not a good idea to underinsure with the legal minimum of a third party car insurance plan or even a bare-bones comprehensive plan if doing so will put yourself in a position where you'll still be on the verge of financial ruin if you crash your car.

Parting thoughts

At the end of the day, the best cheap car insurance plan for you is the plan that provides you the level of coverage you need to protect yourself, at the best price. Depending on your situation, this may mean that the cheapest plan on the market for your driver profile may not always be the best choice — but, then again, it could be!

The main takeaway we hope you bring away from reading this article is that buying car insurance should not be done hastily or thoughtlessly.

Consider your unique circumstances and needs carefully and analyse the car insurance plans on the market with these in mind, and you'll be certain to find a great deal on a car insurance plan that will definitely have your back.

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This article was first published in ValueChampion.