NCD, excess, named driver - Important Car insurance terms you must know

Car insurance, aside from being compulsory in Singapore, is about minimizing your financial risks when you're on the road.

Before you get your very first car insurance quote, here are some basic car insurance terms that you should know.

• No-Claims Discount (NCD)
• Excess in car insurance 
• Named Driver(s)

These terms are important because they contribute to lower insurance premiums - so start taking notes if you're looking for cheap car insurance. 
 
 
No-Claims Discount (NCD)

What is NCD in car insurance?

NCD refers to "no-Claims discount" and it's given by insurers to drivers who practice safe driving. 

You're entitled to an NCD if you've stayed claim-free for at least a year. The longer you stay claim-free, the higher your discount becomes - your NCD can go up to 50% and that'll save you big bucks in the long run!

Here's how it works:

Period of insurance with no claims	Discount on renewal
1 year	10%
2 years	20%
3 years	30%
4 years	40%
5 years or more	50%

Most Singaporean drivers practice safe driving and use NCD to get cheap car insurance. It's one of the easiest ways to lower your car insurance premiums.

What happens to my NCD after a claim?

Your NCD privileges won't be revoked just because you've made a claim. You'll only lose your NCD if your liability is more than 20%.

However, should you're found to be "at fault", your NCD could very well be affected. Insurers can lower your NCD by 10% or more, depending on their policies. 

For instance, if your NCD is 30% and you've been found to be largely responsible for it, your NCD can drop to 0% and you'll need to start from the bottom once again. 

Here's what it looks like:

Current NCD	NCD after one claim
50%	20%
40%	10%
30% or less	0%

Can my NCD be protected?

Your NCD can be protected with an NCD protector. An NCD protector allows you to make one claim under your car insurance policy without losing your NCD privileges. 

You'll need to pay an extra fee for the NCD protector scheme, and the fee varies across insurers. Most insurers will offer you the scheme once yours reaches 50%, but whether it's worth buying is another question.

Accidents are inevitable even for the safest drivers. So, if you have an NCD protector that allows you to make ONE claim, the 50% discount that you've been carefully accumulating over the years will be protected. 

While it does cost more to own an NCD protector, you're still paying for cheap car insurance thanks to your NCD.

Is my NCD transferable? 

 Yes, because it applies to you and not your car - remember, NCD is a reward meant for the driver!

You can transfer NCD from one car to another, but only if your vehicle remains within the same category of being a Private Car. You will not, however, be able to transfer your NCD to a commercial vehicle. 

Do take note that your NCD may not apply for your second car. So, while your first car has a 50% discount, your second car may not enjoy the same privileges even though you're the driver.

Will I lose my NCD if I sell or scrap my car?

No, you won't lose it instantly. Most car insurance companies in Singapore allow drivers to retain their NCD for up to 24 months, but some insurers only let you keep it for 12 months - clarify with your insurer before you make such plans. Here's all you need to know about your NCD. 
 
 
Excess in car insurance

What is car excess in insurance?

A car insurance excess is the sum payable, from your own pocket, before your insurer covers the rest of the damages. 

Under your insurance policy, if you have an excess of $500 and the repair costs - of an unfortunate accident - amounts to $3000, you'll only need to pay $500. Your insurer covers the remaining $2500.


Types of excess in car insurance

Excess in 'Own Damage'

Should your vehicle be damaged you'll be allowed to claim for the repairs regardless of whether you're at fault or not.

Take for instance: Your excess is $500 and this applies to your 'own damage' claims. Suppose you hit another vehicle and damages for your own car costs $6,000 and the other party's (third party) damages are $8,000. Your excess of $500 will only apply to your vehicle's $6,000, while your insurer pays the full amount for the third party's $8,000.

You should be automatically covered for 'own damage' claims if you choose a comprehensive car insurance plan. To find out more about the different types of car insurance plans, click here! 

Excess in 'Third-Party'

Using the same example as described in the 'Own Damage' section, you'll have to pay the excess of $500 for your 'own damage' claim while your insurer pays the remaining $5,500 and an additional excess of another $500 for the 'third-party' claim while your insurer pays the remaining $7,500.   

Excess in 'All Claims'

'All claims' refers to the total excess applicable to every accident. With reference to the same example above, you'll only need to pay the $500 excess. Your insurer will cover the remaining $13,500, (the sum of the $6,000 'own damage' claim and the $8,000 third party claim) excluding the $500 excess payable.

Is it better to have high or low excess?

You may have heard that opting for a higher excess helps you bring down your car insurance premiums. This is largely true - a higher excess means insurance companies give you a lower payout if you (touch wood) get into an accident.

Find out what are the other factors help determine your car insurance premiums.
 
 
Named Driver(s)

What is named driver?

A named driver is a person who is permitted, by the owner, to drive the car. This named driver is also covered by the owner's insurance policy.

A named driver is entitled to the same privileges as the car's owner. Most family members will be included in the named drivers' section of the car insurance policy, to ensure protection is extended to them as well. 

If an unnamed driver using your car gets into an accident, the car insurance company can impose a higher excess on your claim.

Should you add named drivers to your car insurance?

Yes, especially if you've got a family member who uses the car frequently. This helps ensure that financial risks remain low because your excess stays at the same amount even if he or she gets into an accident.

However, do note that adding multiple named drivers will incur an additional cost. The more named drivers you have, the higher the risk your car is at of getting into an accident - especially if your "named drivers" consists of inexperienced and young drivers, who are deemed as higher-risk drivers by insurers.


Here are some car insurance-related articles that might interest you

Ultimate Guide to Car Insurance in Singapore

Best car insurance policies in Singapore for 2020

Car insurance quotes comparison: are you getting ripped off?

9 ways to lower your car insurance premiums

*This article was updated by Alexandra Cheung on 15/9/20