25 August 2020
CAR INSURANCE 101: Important key words you need to know

If car insurance jargon is Greek to you, this is the right place to get the low-down on the key words you need to understand and know what to look out for.

There are many ways to care for our car. We could send it for regular servicing, give it a good shine, or even have it sanitised ever so often. While insurance and car care might not frequently appear in the same sentence, having your car insured means keeping you and your wallet safe from any unexpected financial costs.

Like most things, understanding the basics is important before diving into the more complicated components. Here are some key words you’ll need to keep in mind when buying car insurance. Some of these might ring a bell if you’ve bought any other sort of insurance.

Why do you need car insurance?

In Singapore, it is an offence not to have your car insured. The penalties are a fine of $1000, up to three months jail, or both. Your driving license will also be suspended for 12 months. Insurance is also a prerequisite for road tax renewal.

This is just as well because insurance primarily provides financial protection during car accidents and theft. More comprehensive insurance schemes can offer additional benefits to cover other damages. It essentially protects you from having to pay fully for any damages straight from your wallet should your car be involved in an accident.

Without insurance, accidents like these hurt more than just your cars.

With that in mind, let’s get started!

Important key words

Insurance Premium

Nothing in life is free (sobs), and neither is your insurance. The premium refers to the amount you have to pay for your insurance policy. You could choose to pay a lump sum fee, or in monthly instalments through credit card or GIRO. The premium you pay will vary between insurance companies and the benefits offered, but we’ll discuss that in a later article.


Looking for an insurance that covers 100% of the damages? You’re better off unicorn hunting, and the next best solution is paying a really high premium for anything that comes close to full coverage.

For any accident, two kinds of payment typically happen. The first is an up-front payment to partially cover the repairs, and the second is the insurance coverage that pays the rest of it. The excess refers to the first payment made by the insured driver.

Excess and premium go hand in hand. The higher your excess, the lower your premium, and vice versa. Depending on your situation and whether you are an accident-prone driver, the high-excess-low-premium insurance might not be ideal for you. This is something you might want to take into account too, if the family car is shared among different drivers.

No Claims Discount (NCD)

AKA the No Claims Bonus. Think of the NCD as a reward system the insurance company gives you for your safe driving. For every year you go without making any insurance claims, you get a discount on your premium the following year. This can go up to 50% if you manage to stay accident-free for five years.

Period without insurance claimNCD
1 year10%
2 years20%
3 years30%
4 years40%
5 or more years50%

However, this reward system is not all-give and no-take. Your NCD can also be reduced if you make any claims, or if you make multiple claims in a year. Yet another facet of insurance to take into account if you regularly mount a curb or nick your car on that carpark pillar.

Fortunately or not, the NCD ‘tally’ does not reset if you change your car since it is tagged to your name. Better start raking in those brownie points!

Named Drivers

Last but not least, the insurance company and policy need names. If you are the sole driver of the car, the insurance company will refer to you as the main driver.

Named drivers then refer to any other drivers with whom you share the car, such as your spouse or your child. While you are the main driver and policyholder, named drivers will also be covered under the same insurance policy. The premium and excess may vary depending on the insurance company you sign up with, so make sure to read the fine print before signing on the dotted line.

Planning to buy car insurance but not sure where to start? Let us help! Get in touch by dropping us a note in the form here.