How Much Excess Do You Need For Car Insurance?
If you’ve checked out our guide on Everything Useful About Car Insurance, you’ll probably recall that the type of excess will affect your car insurance premiums payable every year.
However, this is dependent on many factors, including your budget, driving habits, history of accidents, frequency of claims made, risk tolerance level, and whether you’re owning your own car or you’re using car-sharing platforms or renting a car from car rental companies.
Here are some insights from us on how typical car insurance excess works, how much car insurance excess usually costs and how to pick the right car insurance excess type for your car.
What Is Car Insurance Excess & How Does It Work?
Car insurance excess, similar to a deductible in homeowners insurance, is the first amount that you agree to bear in the event of a claim. In essence, it's a co-pay, a set amount the policyholder must pay towards the costs of an accident or damage before the insurance company steps in to cover the remaining costs.
Low, standard or high excess
- Low Excess: Choosing a lower excess means you'll pay less out of pocket when you make a claim, but your insurance premiums will typically be higher. This is a good option if you want to minimize your immediate expenses but are willing to pay more for your coverage in the form of higher premiums.
- Standard Excess: Many insurance policies come with a standard excess amount. This is a reasonable balance between what you pay out of pocket and what your insurer covers. It's a good choice if you want to keep your premiums affordable while still having some financial protection in case of an accident.
- High Excess: Opting for a higher excess means you'll have to pay more out of pocket in the event of a claim, but your insurance premiums will be lower. This is a good choice if you're a safe and confident driver and want to reduce your premium costs, as you'll only need to pay a larger amount in the event of a significant claim.
Car-sharing insurance with varying excess amounts
Car-sharing insurance is a form of coverage tailored for vehicles that are part of a car-sharing service. As car-sharing becomes more prevalent, especially in urban areas, the need for a specific insurance policy covering these shared vehicles has increased.
Like traditional car insurance, the policy includes an excess (also known as a deductible) which is the amount the policyholder agrees to pay in the event of an accident or damage. The remaining costs, up to the policy's limit, are then covered by the insurance company.
The amount of the excess can vary, and this impacts the insurance premium. In a car-sharing insurance policy, the excess amounts often vary based on factors such as the type of car being shared, the duration of its use, and the driver's record. For instance, a shorter duration of use or a driver with an excellent driving record might result in a lower excess. Conversely, high-performance or luxury vehicles and longer usage durations might lead to a higher excess.
Cost of car insurance excess is often personalised
The actual cost of your excess will vary depending on your individual circumstances and many other factors as well. Young or inexperienced drivers may be required to pay a higher excess while seasoned drivers may pay lower excess. Some car insurers also offer different excess options depending on the type of car insurance policy you choose. For instance, comprehensive policies may have different excess options than third-party only policies.
Estimated Average Cost of Car Insurance Excess In Singapore
| Car Insurance Provider | Standard Excess (S$) | Low Excess (S$) | High Excess (S$) |
|---|---|---|---|
| DirectAsia | 500 - 600 | 250 - 400 | 800 - 3,000 |
| FWD | 500 - 600 | 300 - 400 | 750 - 3,000 |
| MSIG | 500 - 600 | 450 - 500 | 800 - 3,500 |
| Singtel | 550 - 650 | 350 - 550 | 700 - 3,500 |
| Tokio Marine | 550 - 650 | 400 - 550 | 850 - 3,500 |
| *The above estimated data are accurate at the time of writing on 27 November 2023, and are subject to change at the discretion of the respective car insurance companies. Please note that the above are estimated costs and could vary based on several factors such as the type of car, driver's age, driving experience, and claim history. |
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Tips On Choosing The Right Car Insurance Excess Type
Keep to your budget
Your current financial situation plays a significant role. If you want to keep your ongoing expenses low, you may opt for a higher excess and accept the risk of paying more out of pocket in case of a claim. On the other hand, if you can afford higher premiums, you might prefer a lower excess.
Align the type of excess to your risk tolerance level
Your willingness to take on more or less risk is a key consideration. If you're risk-averse and prefer to have more predictable expenses, a lower excess might be the better choice. If you're comfortable with some financial risk and want to reduce your premium costs, a higher excess could be suitable.
Consider your driving history and habits
If you're a safe driver with a clean record and low likelihood of accidents, you may feel more comfortable with a higher excess. If you have a history of accidents or anticipate more risk, a lower excess might be more appropriate.
Match the vehicle value to the right type of excess
The value of your car is important. If your vehicle is expensive or new, you may want to opt for a lower excess to minimize your out-of-pocket expenses if it's damaged. For older or lower-value vehicles, a higher excess may make sense, as repair or replacement costs are lower.
Take note of frequency of claims
If you're prone to making frequent claims, it might be more cost-effective to choose a lower excess to limit your out-of-pocket expenses each time you file a claim. However, if you rarely make claims, a higher excess can help you save on premium costs.
Review the terms and conditions of your insurance policy
Some policies may have mandatory or fixed excess amounts, while others offer flexibility in choosing your excess. Understand the options available to you and choose one that aligns with your preferences.
Think about the overall premium costs
The impact of your excess choice on your total premium costs is essential to consider. Get quotes for different excess levels and assess how they affect your overall insurance expenses. Striking a balance between upfront costs (premiums) and potential future costs (excess) is key.
Take into account necessary legal requirements
In some regions or for certain types of insurance coverage, there may be legal requirements or limitations on the level of excess you can choose. Ensure your selection complies with Singapore’s laws.
Frequently Asked Questions
How do I choose the right car insurance excess?
- Choosing the right car insurance excess involves considering your financial situation, driving habits, and risk tolerance. Opt for a higher excess if you have a good driving record and sufficient savings to cover potential costs. Conversely, a lower excess might be suitable if you're risk-averse or have a history of claims.
What is the cost of car insurance excess in Singapore?
- The estimated costs could vary based on several factors such as the type of car, driver's age, driving experience, and claim history of your car in Singapore. As per MoneySmart’s research and latest estimated average cost of car insurance excess (in our round-up of the ones by the top 5 car insurance providers in Singapore), it will range from $250 to $3,000, depending on which type of excess you choose.
Is higher car insurance excess better than standard or low?
- Yes and no. It really depends on your financial situation, driving habits, and risk tolerance. Opt for a higher excess if you have a good driving record and sufficient savings to cover potential costs. Conversely, a lower excess might be more suitable if you're risk-averse or have a history of claims. Higher car insurance excess may be advantageous for you if you have a clean driving record, as it can result in lower premiums. However, it means you'll bear a greater cost in the event of a claim.