Essential Car Insurance Terms 101: NCD, Excess, and Named Drivers

Car insurance isn't just a legal necessity in Singapore; it's a crucial safeguard against financial risks on the road.

Understanding key terms like No-Claims Discount (NCD), car insurance excess, and named drivers can significantly lower your premiums.

Let’s dive into these essential terms and how they can benefit you.

No-Claims Discount (NCD)

Understanding NCD in Car Insurance

No-Claims Discount (NCD) is a reward given to drivers who maintain a claim-free record.

Essentially, it's a way for insurers to incentivize safe driving.

If you avoid making any claims for a year, you earn a discount on your renewal premium.

How NCD Works

Your discount increases with each consecutive claim-free year, maxing out at 50%.

• 1 year: 10%
• 2 years: 20%
• 3 years: 30%
• 4 years: 40%
• 5+ years: 50%

For many drivers in Singapore, maintaining a clean record and maximizing their NCD is a straightforward method to achieve cheaper car insurance.

Impact of Claims on NCD

If you make a claim, your NCD isn’t automatically revoked.

However, if you're found liable for more than 20% of the damages, your NCD could be affected.

For instance, with a 30% NCD, being at fault could drop your discount to 0%, resetting your hard-earned progress.

Protecting Your NCD

You can opt for an NCD protector, which allows you to make one claim without losing your NCD benefits.

While this comes at an additional cost, it can be a worthwhile investment to maintain your discount.

Transferring and Retaining NCD

Your NCD is non-transferable between drivers but can be transferred between cars, provided they remain within the same category (private to private, not private to commercial).

You can also retain your NCD for up to 24 months if you sell or scrap your car, though policies vary by insurer.

Excess in Car Insurance

Defining Car Insurance Excess

Excess is the amount you must pay out of pocket before your insurance covers the remaining costs.

For example, with a $500 excess and a repair bill of $3,000, you pay $500, and your insurer covers the remaining $2,500.

Types of Excess

• Own Damage: Applies to claims for damage to your own vehicle, regardless of fault.
• Third-Party: Applies to claims for damage you cause to another party’s vehicle.
• All Claims: The total excess applicable to all claims from a single incident.

Choosing the Right Excess

Opting for a higher excess can lower your insurance premiums since you’re agreeing to pay more upfront in the event of a claim.

This can be a good strategy if you’re confident in your driving abilities and want to reduce your premium costs.

Named Drivers

Who is a Named Driver?

A named driver is someone who is permitted to drive your car and is covered under your insurance policy.

Typically, family members are included to ensure they are also protected.

Benefits of Adding Named Drivers

Adding frequent users of your car as named drivers ensures that your excess remains the same even if they get into an accident.

However, adding multiple named drivers, especially inexperienced ones, can increase your premium.

Why Include Named Drivers?

Including named drivers can prevent higher excess charges in case of an accident.

If an unnamed driver is involved in an accident, the insurance company may impose a higher excess, increasing your financial burden.

Conclusion

Understanding these key car insurance terms—NCD, excess, and named drivers—can help you make informed decisions, lower your premiums, and ensure you’re adequately protected.

Safe driving not only keeps you and others safe but also rewards you with financial benefits.

Writer's note: Images are purely fictional; for illustration only.