Understanding car insurance deductibles in the Philippines

What are car insurance deductibles?

It is the amount of money a policyholder pays from their pocket before the insurer comes forward to cover the remaining cost for repair or damage.

Let us understand deductibles with the help of an example -

If you have a car repair bill of PHP 20,000 and a deductible of PHP 5,000, then in the event of an incident such as a collision or accident, you’ll end up paying PHP 5,000 for car repair, and the insurer will cover the remaining bill of PHP 15,000.

Purpose of car insurance deductible

So, why do deductibles exist? They serve several purposes, including risk sharing, discouraging minor claims, and making premiums more affordable. Understanding these purposes can help you see the value of deductibles in your car insurance policy.

• Deductibles serve as a tool to promote responsible driving among policyholders. By requiring you to pay a portion of the repair costs, deductibles encourage you to drive safely and avoid situations that could lead to claims.
• Discourages minor claims. Deductibles discourage policyholders from filing claims for minor issues, such as scratches.
• Affordable premiums. Fewer claims from the policyholder will lead to more manageable premiums.

Types of car insurance deductibles

In the Philippines, car insurance deductibles are categorised into four main types: fixed, percentage, compulsory, and voluntary. Each type has its unique features, and understanding these differences can help you select the most suitable deductible for your policy.

Fixed deductible - As the name suggests, here, the deductible amount is set regardless of the car’s value.

Percentage deductible - Here, the deductible amount is calculated based on a percentage of the car’s value.

Compulsory deductible - It is the fixed amount of money that the policyholder must pay out of pocket, as required by the insurer.

Voluntary deductible - The policyholder chooses this type of deductible, which in turn affects the premium. For instance, the higher the deductible you pay, the lower your monthly premium will be.

Deductibles and insurance premiums

It is a common practice for insurance providers to lower the premiums for policyholders who choose higher deductibles. Why? That’s because here, policyholders are taking more risk on themselves than the insurer.

Therefore, higher deductibles result in lower monthly premiums but higher out-of-pocket costs when a claim is filed. On the other hand, a lower deductible results in a higher monthly premium and fewer out-of-pocket expenses during a claim.

What is better, higher or lower deductible?

It all depends. Consider a higher deductible if you believe you are a safe driver and rarely file claims. A lower deductible is recommended for individuals living in flood-prone areas or those who frequently travel through congested traffic.

Typical deductible Filipino’s pay

The deductible amount that Filipinos pay out-of-pocket typically depends on several factors, including the insurer, the car’s model and make claim history, and type of coverage. On average, car insurance deductibles in the Philippines range from PHP 2K to PHP 10K.

When you have to pay deductible & when not

Every time a policyholder files a claim for damage under comprehensive insurance, they are required to pay a deductible. Some common scenarios include - vandalism, damage due to attempted theft, natural disasters, or self-inflicted damage to the vehicle.

Coming to cases when you are not required to pay deductibles, it’s only at the time of Third-Party Liability (TPL) insurance claims made by others against your policy.

What isn’t covered even after paying the deductible

Yes, certain damages are not covered by an insurance policy, even after the deductible has been paid. This includes policy exclusions such as wear and tear, unauthorised driver, usage or repairs, driving without a license, driving under the influence, and damage due to illegal racing.

Note that it is advisable to read the policy fine print to know the policy exclusions.

Factors affecting the deductible amount

The amount of deductible is affected by several factors, like -

• Type of vehicle: new & luxury cars often have higher deductibles.
• Driver’s profile: Young drivers may get charged higher deductibles compared to experienced ones.
• Claim history: More claims mean higher risks, which results in a higher deductible.
• The insurance policy also affects the deductible amount.

Tips to save car insurance deductibles

• Compare insurance plans before making the final call.
• Bundle your car insurance policy with other policies, such as home and life insurance.
• Renew your policy early.
• Ask for loyalty points.
• Drive safely.
• Avoid multiple claims.
• Customise your coverage as per your driving habits and lifestyle.

Questions to ask when choosing a plan based on deductible amount

When choosing the right car insurance plan based on the deductible amount, one must ask the following questions -

• Will I be able to afford the required deductible amount instantly?
• What do I prefer, monthly savings or peace of mind?
• Do I often travel through high-traffic or risky areas?

Common myths about car insurance deductibles

Myth: Deductibles are refundable.
Reality: No, they are not. It is your portion of the cost you must bear.

Myth: TPL includes vehicle damage.
Reality: TPL only covers third-party damages, such as injury or death. It does not cover your car damage.

Myth: Old cars do not need deductibles.
Reality: All cars, whether new or old, are recommended to have comprehensive insurance, which typically requires a deductible.

Myth: I don't have to pay anything; the claim settlement amount will cover everything.
Reality: No, that is not the case; you have to pay the deductible first.

Bottom line

If you want to avoid surprises at the time of filing a claim, you should understand all about car insurance deductibles. It is essential for every Filipino car owner, whether new or experienced, to know how much they are expected to pay out of pocket in the event of an insurance claim. This will not only prepare you for such uncertain expenses but also make you a better driver, enabling you to make more informed choices.

FAQs

Q1. What do deductibles mean for car insurance policyholders?
Ans. A deductible is the amount of money a policyholder is required to pay before the insurer's claim settlement amount kicks in.

Q2. Is it possible to avoid paying car insurance deductibles?
Ans. Generally, a policyholder is required to pay a deductible; however, there may be an exception in cases of a promotional offer or a zero-deductible plan offered by the insurer.

Q3. Do I have to pay the deductible only once a year, or every time I make a claim?
Ans. Every time a policyholder files a claim, they are required to pay the deductible. So, no claim = no deductible.

Q4. In the event a car is stolen or declared a total loss, will the policyholder still be required to pay the deductible?
Ans. Unfortunately, yes. Even if your car gets stolen or marked as a total loss, you’ll be required to pay the deductible before the insurer processes the claim.

Q5. How do I know the deductible amount?
Ans. If you forget the deductible amount you need to pay, we recommend inquiring directly with your insurer or checking your policy.

Q6. Can the deductible amount be negotiated with the insurer?
Ans. There is no harm in trying, as some insurers offer some perks to loyal customers.

Q7. My car’s windshield got damaged. Do I have to pay deductibles?
Ans. Yes, to claim windshield coverage, you’ll be required to pay a deductible.

Q8. Do I have to pay the deductible in case of TPL insurance?
Ans. No. Only claims concerning comprehensive insurance require you to pay deductibles.

Q9. Does filing frequent claims affect future deductibles?
Ans. Yes, frequent claim filing leads to higher deductibles and premiums.

Q10. I am a budget-conscious policyholder. What’s the best deductible for me?
Ans. We suggest, in the middle ground, to try not to exceed the deductible amount by PHP 5,000, which is easy to manage and can be paid instantly.

Also Read: A simple guide to car insurance endorsement in the Philippines