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Demystifying comprehensive and third-party liability insurance for motor vehicles
For many new car owners, budgeting is mostly focused on installing accessories. As vehicle owners in Hong Kong are only required by law to purchase third party insurance, many opt for third party insurance over comprehensive coverage due to cost considerations. Yet, many people do not realise purchasing only third-party insurance can often end up being penny wise but pound foolish. The following will demystify the difference between the two types of coverage and explain how comprehensive insurance can protect the vehicle owner in case of a collision.
Purchasing only third-party coverage could result in out of pocket expenses
To save cost, some car owners purchase only third-party insurance, which only covers loss arising from an accident for a third-party, including a passenger of the insured vehicle. While the insured's vehicle is also subject to damage from an accident, third-party insurance does not cover the driver for death and injury, or for damage to the insured vehicle. Without comprehensive coverage, the owner would face out of pocket expenses for replacing things such as damaged guard rails and headlamp covers. If a car door or rear end is damaged, repair costs can run up to five or even six figures.
Comprehensive insurance includes not only third-party liability coverage, but also medical expenses cover for injuries suffered by the driver. There are comprehensive insurance policies that would cover windscreen damage, with no applicable excess for claims under a specified amount and no impact on existing No Claims Discount. In case of total loss for an under a year- old vehicle, the policy would not deduct any amount for depreciation, providing cash compensation or replacement with a new vehicle of the same model. Car owners with only third-party insurance would have to shoulder repair costs ranging from a few to tens of thousands.
Regardless of confidence level in one's own driving skills, comprehensive insurance provides more well-rounded protection for the insured, the vehicle and passengers, as compared to third-party insurance.
Not reporting minor accidents could be costly
Car owners with comprehensive insurance should be mindful of handling procedures after a collision. In case of minor fender benders, many owners are inclined to privately settle the matter. There have been cases where the insurance company was not notified because the third party had not sought compensation and the insured wanted to keep the No Claims Discount. A year later, after receiving a claim letter out of the blue from the third party, the insured filed a claim with the insurance company. As the insured had not notified the insurance company immediately after the accident, this affected the claim investigation and information collection process for liability determination. The vehicle owner ended up having to pay out of pocket.
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