The Most Misunderstood Car Insurance Clauses

When you buy a car, you get a car. It’s that simple. But buying insurance is another matter, what you are going to get (other than coverage) is determined later, or in the best case scenario, never. Once an unfortunate incident occurs, it is easy for people to forget the details of their insurance coverage, and think that they are entitled to things that may not have been covered in the contract.

Familiar? Yes.

The best return from insurance is no return at all, which is far better than having your policy cancelled if you had to file a claim due to an incident. When you get your insurance, the policy wording document is essentially the terms, conditions and definitions of your policy. It is a lengthy document but you should always read it to make sure what you’re claiming for is covered.

Insurance companies take their fine print very seriously – and the regular human being can be bewildered at the lawyer language that many of such companies use. And yes, we’re going to name five of the most misunderstood clauses by Singaporean drivers, starting with…

While the definition of roadworthy varies between people, the official rule on roadworthiness in Singapore focus on five key areas: Tyres, brakes, steering, lights as well as turn signals/indicators , but that’s just the official rule #106, Road Traffic Act, chapter 276, section 112.

But, to the insurer, any car defects are steps towards rejecting claims due to un-roadworthiness . Having only one working headlight at the time of the incident, or having two different types of tyres can constitutes to the car not being roadworthy. There have been claims rejected from accidents caused by “brake failure” - due to poor brake maintenance. Old fluid, cracked brake hoses, and the list goes on and on...

In short: Never skimp on regular inspection and thorough maintenance. Even if it’s a broken light bulb, fix it. And most importantly, any modifications must be legal and declared to the insurer for a roadworthy assurance.

We all have that time when we attend a “normal” meeting and end up unexpectedly tipsy, or full-on drunk, especially when you have a VIP who loves to pass the bottle around just a bit too much.

And while being on cloud number 9, you call a friend who didn’t have a single drop to drive you and your car home. Unfortunately, something bad happens and you need to file an insurance claim.

And surprise, your insurer calls you to say sorry and good luck. What happened? Insurers have a varying response to such a situation. Many of them will immediately waive their liability if you had one single drop of alcohol, and some coverage will differ if the drunk you calls a friend or a valet to drive you and your car home.

In short: While valet services come with their own insurance coverage that covers incidents, your insurance policy may differ, so read it very, very carefully. Some insurers do not cover unnamed drivers (even if they’re authorised by you), especially for high-performance vehicles. In all, a taxi or a Grab ride may just be the most fuss-free solution in the end!

“What? I thought it means everything? Does it already have personal accident benefits, medical expenses, towing costs, 24-hour roadside assistance as well as theft, fire, vandalism, flood and blah blah blah? Why do I have to claim from my own insurance when I’m not at fault?”

Most drivers are perplexed when told that they will have to claim their own insurance under the comprehensive plan for an accident of which was of not their own fault. In car insurance, the word actually refers to coverage limited to your vehicle.

If your windscreen gets smashed by a flying stone on the roads, it won’t be covered by third-party car insurance. It doesn’t provide any coverage or compensation for you or your vehicle even in a collision.

Last but not least, most budget-oriented comprehensive coverage plans do not cover you, or any authorised driver of your car for injuries and death - the options do add up quickly, so don’t rush the insurance decision process!

$500? Only $500 out of pocket? Yay!

What is the role of excess? Excess, a.k.a the “deductible”, is to the portion of the claim which you have to bear. If you have an excess of $500 and the total repair costs $3,000, then you have to pay $500 while the insurer pays the remaining $2,500.

Excess, in the most basic insurance language, means the amount shown in the policy schedule or certificate of insurance which you must pay for... every claim. And you know how south this can go…

For some insurers, there are other sections that can make you liable to fork out more than just the first $500. For some insurers with a excess “Section II”, which deals with third party claims, there is an additional excess for the additional claim.

Imagine a two-car accident, in which your car has a $3,000 damage bill, but the other vehicle you hit has a damage bill of $8,000. You pay $500 and the insurer pays $2,500 for your own damage of $3,000. For the third party claim, you have to fork out another $500 while insurer would pay $7,500 for a claim of $8,000.

On the bright side, there may be a section that states “Excess All Claims” instead. It simple English, it means the total excess applicable for every accident. Using the same example above, the insured pays an excess $500 while the insurer pays $10,500, the sum total of $3,000 and $8,000, minus the excess of $500. Now, breathe easy.

Because there are other excesses such as young/inexperienced driver excess…

“I drive the car to work, then drive home, I should be fine, right?”

This basically tells insurers how you use your car and is used to determine how much you will pay. If you need to make a claim and it turns out you're using the car for purposes that you're not covered for, you will find yourself in hot soup - and perhaps a loss of insurance coverage completely.

Private, social, domestic or pleasure purposes are common terms in car insurance, and it is the typical usage of vehicle for visiting family or friends, shopping, or driving into Malaysia for a weekend getaway.

But, some insurers are sticky when it comes to driving to work and for work. If you do drive to work, it is considered commuting. Even if you chose to park your car elsewhere and take a bus or a train (rest in peace, Park & Ride) to your workplace, insurers still call it commuting.

So, maybe you commute to work, and then you have to drive out to meet really important clients, then you'll need to make sure you have the full business cover. This covers you for everything under the sun, including private and commuting use.

You may be thinking that business and commercial are the same, right? Wrong, that is why private hire cars have to purchase commercial insurance…

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