Understading Motor Car Insurance, part 1

By Randell Tiongson on June 25th, 2009

When you buy a car, getting a car insurance is as automatic as night turning into day. Getting a comprehensive coverage, however, is another story. Considering the population of motor vehicle owners, a small portion of the pie understands the worth of paying premium for a comprehensive coverage. What most Filipinos avail (actually, it is due to the force of the law) is the basic TPL or Third Party Liability insurance. It is also called CMVLI or COMPULSORY Motor Vehicle Liability Insurance. The name gives away its purpose and its being compulsory in nature.

The law makes it unlawful for a person to use his motor vehicle without CTPL. This is a condition precedent for vehicle registration. Clever idea, but I think the LTO forgot to find a way to prevent the proliferation of “fly by night” car insurance companies but that’s another story.

For those who own the latest and relatively new models, and due to some sale requirements, their vehicles are covered by comprehensive car insurance. Recently, the LTO made registration term of latest car models with comprehensive coverage a term minimum of three years. For owners of vehicles that are older than 5 years, they think it is not worth to pay for a comprehensive coverage.

A person’s risk tolerance is not my concern here. My concern is only to educate the reader about CTPL and probably the so-called “benefits” of a comprehensive insurance. I will leave the right to discern the “importance” of getting comprehensive coverage to the reader himself.

What is CTPL? CTPL is actually a “liability” insurance. In layman’s term, it is a contract of assuring the general public that the owner of the vehicle shall be able to pay him or her in case bodily and/or property damage due to the vehicle owner’s negligent use of his car. For instance, the driver of the vehicle accidentally ran over a pedestrian, the pedestrian is assured that he can claim reimbursement for the hospitalization costs he spent, or at least some. CTPL under the law has a coverage of only P100,000. More than this amount, the offending party shall bear the cost. That is for the protection of the pedestrian who is probably equally negligent anyway. But how about if the driver swerved his vehicle to avoid the pedestrian and hit a tree instead? Or worse, he hit the pedestrian and hit the tree also totally wrecking his car?

Here comes your comprehensive coverage to the rescue… Usually, the Comprehensive motor car insurance will give you the ff: coverages on top of the CTPL —

1) Own Damage & Theft (OD Theft) : Coverage against theft or damages to the vehicle. Say you parked your car and suddenly found the car’s fender dented and there’s no way for you to determine who caused the damage, you can still claim for the actual cost of fixing the damage (unless the amount is lower or equal to the stated participation expense of the insured). Claims against OD/Theft are subjected to a deductible fee (a percentage of the coverage or a flat amount) and depreciation. An adjuster (who is a an independent contracted party) will determine the actual cost of damage. Thanks to the principle of “subrogation,” the insurance company will pay you, and in turn, will be the party who will have to worry about going after the party who caused your damage.

2) Voluntary Third Party Liability (VTPL) – this is a coverage up to a particular amount that is applied after exhausting the amount provided under the CTPL provision or P100,000. In other words, the first P100,000 is chargeable against the CTPL provision and the excess to be covered by VTPL.
a) Bodily Injury – for reimbursement of medical costs for victims of the vehicular accident
b) Property Damage – for property damages caused by the vehicle.

Catch part 2 of this blog soon….

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6 thoughts on “Understading Motor Car Insurance, part 1”

  • I would like to correct that CTPL insurance coverage is for bodily injury to a third party only, and does not cover the property damage as stated in your paragraph “In layman’s term, it is a contract of assuring the general public that the owner of the vehicle shall be able to pay him or her in case bodily and/or property damage due to the vehicle owner’s negligent use of his car.”

  • Question :
    If the parties amicably agreed to pay for the participation fee for insurance purposes, would the party still pay for the cost of the damage as well?

  • I was involved in a vehicular accident wherein i bumped an e-bike. When we brought the bike for estimate, the cost of repair was 14K. However, the insurance company just paid 11k. Now, the owner of the e-bike charging me of the difference. The questions is, am i liable to pay the difference because the insurance company did not cover the cost of repair?

  • Hi I want to ask a question how much the participation fee of federal Phoenix insurance if the damage of car insured is damaged by typoon or it is because of typhoon…thanks

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Understading Motor Car Insurance, part 1