Motor insurance: facing extreme weather with confidence

Due to the frequency of typhoons and heavy rainstorms in recent months, it is now imperative that individuals are prepared for extreme weather situations. Even when seeking shelter indoors, the risk of window damage or leaks due to weather conditions, not to mention to cars parked outside, has increased. As such, wise car owners will have ensured they have motor insurance to provide an additional financial safeguard.

However, there are many things to consider when it comes to purchasing motor insurance. The differences between third-party liability coverage (“liability coverage”) and more comprehensive motor insurance (“comprehensive coverage”) are significant. Without a clear understanding of these distinctions, and without having the appropriate motor insurance, there is no guarantee you will be compensated if your vehicle is damaged during extreme weather conditions. Therefore, in this article, I will explain the intricacies so you can make up your own mind about the most suitable motor insurance product for your needs. With the right coverage, your vehicle will stay protected – even when unexpected circumstances arise so you can enjoy a smooth journey ahead.

Under Hong Kong law, car owners must have liability insurance to address third-party losses resulting from traffic accidents, as well as any related legal expenses. While there is no legal obligation for car owners to take out insurance with comprehensive coverage, opting for comprehensive insurance is strongly recommended as it can reduce potential losses from unexpected incidents. In addition to providing the coverage offered by third-party insurance, comprehensive insurance also protects the you financially if your vehicle is damaged in an accident.

Take the recent continuous heavy rain as an example. If a car owner has purchased comprehensive insurance with full coverage, her policy will still be in effect even if her vehicle is submerged or otherwise affected by flooding, providing the necessary financial protection. However, she only has third-party insurance, her vehicle will not be covered and the owner will have to bear the financial burden herself as a result.

It is important to note that unless explicitly stated in individual policies, comprehensive coverage generally remains in effect during extreme weather conditions,  such as black rain storms, or typhoon signal number 8 or above. However, policyholders or drivers must pay close attention: most policy clauses specify that the insured person must take all reasonable steps to prevent damage or loss to the insured vehicles, and to keep the vehicle in good condition. Therefore, as a car owner, you should maintain your vehicle and comply with the terms and conditions stated in your policy.

In addition to covering damage to insured vehicles involved in accidents, comprehensive coverage also provides compensation for medical expenses if drivers are injured while driving. Some comprehensive insurance products also offer windscreen protection. In the event of windscreen damage, insurance companies will refer their clients to repair shops. By presenting their driving license, customers can have their windscreen repaired without paying any deductibles (also known as excess fees, which refer to a specified amount that the policyholder needs to pay when filing a claim to an insurance company). If the cost of the repair is less than the specified amount, customers will be able to have their windscreen repaired without paying anything extra.

In addition, when a car owner has comprehensive coverage, even if their vehicle is completely destroyed in an accident and the vehicle is less than a year old, insurance companies on the market will not deduct any depreciation that has occurred from the original value of the car. Compensation will be provided in the form of cash or a new vehicle of the same model. However, if the same car owner is only entitled to liability coverage, they will not enjoy the same benefits if their vehicle is damaged. Considering the difference in the scope of coverage between the two products, I contend that, if budget allows, opting for comprehensive coverage will provide the most thorough protection for my fellow car owners.

This Chinese version of this article was published in the Hong Kong Economic Journal.

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