Is car insurance a necessity?

Randell Tiongson

@inquirerdotnet

Philippine Daily Inquirer

6:48 AM | Wednesday, April 22nd, 2015

Question: My wife and I just bought our first car and we need help choosing the
right car insurance. Is the basic CPTL insurance offered by the LTO enough? Or
is it worth buying a comprehensive car insurance? If we choose the latter, what
are the things we should be looking out for? -John Santos

Answer: Congratulations on the new car! It’s natural to feel unsure and
overwhelmed when buying car insurance for the first time. Let me guide you
through the process.

When you register your car with the Land Transportation Office, you are required
by law to get basic Compulsory Third Party Liability (CTPL) car insurance to
protect against possible liabilities to third parties. According to the Insurance
Code of the Philippines, a third party is defined as any person other than a
passenger, family member, or household member of the vehicle owner.

In other words, CTPL protects pedestrians from potential damages or injuries that
arise from the use of the insured car. This is compulsory and covers any bodily
injuries or deaths caused for of up to P100,000. However, CTPL does not cover
loss or damages to property, and is very limited in this regard.

Many non-life insurance providers also provide comprehensive car insurance.

Essentially, comprehensive car insurance has a wide coverage and insures you
against damage, car theft, liabilities caused by collisions, fire, malicious acts, acts
of God (and nature) and personal accident insurance of the passenger. While
this is not mandatory, it provides some measure of financial security by covering
car repairs and other damages should any unfortunate incidents occur.

It’s smart to get this type of insurance because risk is an everyday reality.
Accidents can happen to you anytime, and if you’re driving to work every day,
you’re exposed to risks that you do not have direct control of.

To illustrate, Edsa accommodates more than two million vehicles on a daily

basis. If you take Edsa to work, you’re exposed to more than 27,000 public utility
buses that figure in the worst traffic accidents.
Another good reason to get comprehensive car insurance is the fact that the
Philippines endures an average of nine tropical storms in a year. It’s like saying
your car is at major risk at least nine times in a year! I have a lot of friends who
had damaged cars during the worst flooding in Manila. Those who had Acts of
God or Acts of Nature in their policy were well-taken care of by their insurance
providers.

If any of these unfortunate incidents makes your car inoperable, comprehensive

insurance picks up the tab for repairs and does all the legwork for you. So
instead of doing the paperwork and trying to get them stamped at one
government office after another, the insurance company will take care of all this.
Depending on your coverage, they’ll even foot the hospital bills in case any
passengers got injured in the accident.

When getting your car insurance, make sure that you read the fine print and
understand what’s included and what isn’t. Many “comprehensive” insurance
policies don’t insure against all types of damages, like riots or typhoons.
Coverage for these instances will require additional clauses:

Acts of God or Acts of Nature covers damage from flooding and other non-
manmade incidents

Personal Accident provides a small amount for any injuries sustained during a
road accident

Medical Reimbursement lets you reimburse medical expenses from injuries

related to the accident

Other add-ons include riot (for protest or riot-related damage), upgrade (for
upgraded car equipment), roadside repairs and towing

Before including these add-ons to your coverage, determine how and where you
use your car. For example, if you live in a flood-prone neighborhood, the Acts of
God clause is worth paying for. If you drive to work daily, it’s safe to include the
Personal Accident or Medical Reimbursement additions.

Get to know the top car insurance providers in the Philippines and see what
coverage they have to offer. As a shortcut to your research, there are several
websites offering comparisons among the car insurance packages of various
providers.

These websites will give you quotes from four or more companies, and do a side-
by-side comparison. This makes it easier for you to analyze your options and
make your choice based on price and your own needs.

Make sure that you compare premiums fairly and objectively before making your
final choice. Some insurance companies may offer very low rates, but the
claiming process can be difficult.
Ask your friends which providers they are using and find out how easy or difficult
the claims process was. Personally, I don’t mind paying a few thousand pesos
more if my insurance provider rescues me during my time of need.

Catch me, Marvin Germo & Paulo Tibig for some learning on finance, investment
and entrepreneurship at Money Talks Cebu on April 25, 2015. For inquiries,
message 0905-3104447.

Randell Tiongson is author of best-selling books No Nonsense Personal Finance,

Money Manifesto and coauthor of Inquirer’s Money Matters book. Visit
www.randelltiongson.com. Do you want your kids to learn about money this
summer? Send them to Money Camp on April 25 to learn money lessons that will
last for lifetime. To inquire, e-mail at info@rfp.ph or text <name><email><MC> at
0917-3464126.

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