Filipinos don’t like reading the fine print of their auto insurance policies. They buy the Comprehensive Third Party Liability (TPL) insurance only because it is a requirement for registering a vehicle. But most people find it a chore to go through all the legal language of an insurance policy, especially the Comprehensive Auto Insurance Policy.
While it is a consoling thought that you drive around in this car-crazy metropolis protected by Comprehensive Auto Insurance, remember the fine print of the insurance policy can be your friend or your headache in the future. When an accident happens, that is when we scramble to understand what benefits we can derive from this oft-unread contract.
Here are 10 important things you should pay attention to in order to avoid problems with your auto insurer:
You cannot drive a motor vehicle if you are under the influence of alcohol or prohibited drugs, otherwise known as DUI (Driving Under the Influence). That last drink you had, just killed your coverage as soon as you turned on the ignition. If you are DUI and get into an accident, the insurance company will not pay for the damages. People find that out the following day after they wrapped their car around a light post or a concrete lane divider.
When you buy comprehensive insurance, at times the effective date of the policy is not the same as your registration date. An example of this is a November purchase of a vehicle with the plate number ending with the number 6. When you miss the registration month and drive the vehicle around, your coverage is not in effect because at the time of any accident, the vehicle should be properly registered with the authorities.
The insurance company will not replace old parts with new. The moment your car leaves the dealership, all its parts are “old” or depreciated. There is a schedule of depreciation that the claims people follow, so don’t start yelling and screaming when you find out you have to shell out more cash for that brand new headlight. Your alternative is to ask the insurance company to pay you in cash. You can head to Banawe’s surplus shops to search for a used headlight similar to the one you just broke.
If you think depreciation is depressing, wait till you find out about the deductible. It’s an amount ranging from 0.5 percent to 1 percent of the value of the car, which is deducted from the proceeds of your claim. In the example above, if the headlight is P10,000 and the depreciated value is P8,000, the calculation does not end there. If your car is worth P1 million, the deductible is 1 percent of that value or P10,000. This means after you apply the depreciation and deductible, you get zero from your insurance policy.
To avoid this problem, you can buy a policy that has a fixed deductible.. Typical would be P2,000 to P3,000 fixed deductible. This means after deducting the depreciation, they will apply the fixed deductible of P3,000, thus you are left with a P5,000 benefit. The downside, however, is this will carry a higher premium rate. The rule of thumb therefore is, if the claim is lower than your deductible, don’t bother filing a claim with your insurer.
Next week, we will tackle “all about claims.”