Blog / Car Insurance
Why Car Dealer Insurance Could Cost You More
Buying a new car is an exciting milestone. But between selecting the right car model, handling COE bidding, and securing financing, many car buyers hand over the reins to the dealership. While this offers convenience, one area where you should hit the brakes is on car dealer insurance—because it may not be your best option.
Is It Mandatory to Buy Insurance from a Car Dealer?
No, it’s not mandatory to buy insurance from your car dealer. In Singapore, you’re legally required to have valid car insurance coverage before driving your new vehicle, but you have complete freedom to compare quotes and choose your own car insurance company.
While car dealerships in Singapore typically facilitate the purchase, they require proof of valid motor insurance before releasing the car. This means you can easily shop around for a policy that suits your needs and budget.
Why Car Dealer Insurance May Cost More
When it comes to insurance when buying a car from a dealer, the offer often comes as part of a bundled deal. Many buyers assume it’s easier to take the package. But this convenience may come at a premium:
- Lack of customisation: Dealers are not insurance experts. They often offer generic policies with coverage features you might not need, which raises your insurance premium.
- Commission-driven recommendations: The car dealership earns commissions from insurance companies. There’s a strong incentive to upsell you a more expensive car insurance policy.
- No guarantee of competitive pricing: Since the dealer isn’t typically comparing across different insurance providers, you could miss out on a better deal and the ability to compare quotes elsewhere.
- Hidden extras: Some bundled policies may include unnecessary add-ons like car key coverage, personal belongings, excess waiver, or inflated premiums due to your driving experience.
Should I Buy Car Insurance from a Dealer?
You absolutely don’t have to—and in most cases, you shouldn’t. Here’s why:
- Get a quote online in minutes: Insurers like Budget Direct Insurance let you get a quote tailored to your car’s make and model, driving history, and desired coverage limits.
- It pays to shop around: Comparing multiple car insurance companies could reveal significant savings on your annual premiums—especially if you have a high no claim discount (NCD).
- You retain control over policy features: Opting for your own car insurance plan means you avoid unnecessary extras and only pay for what you actually need.
- Protect your rights: Singapore's Policy Owners’ Protection Scheme safeguards your motor insurance with licensed insurers, giving you confidence to choose independently.
What to Know About Buying Insurance for a New Car
Before registering a new car with the LTA, Singapore law requires that it be covered by valid insurance. If you’re transitioning from an existing car insurance policy, inform your insurer and update your details immediately to avoid delays and legal issues.
New cars often have higher insurance premiums because of their increased value and advanced features. However, smart decisions can help lower your costs.
Car Insurance Plans for New Car Owners
1. Comprehensive Car Insurance
The most complete protection with coverage for:
- Damage to your car due to accidents, fire, theft, or natural events
- Liability for injury / death or property damage to others
- Optional extras like 24/7 roadside assistance, no claim discount protector or transport allowance
2. Third Party, Fire and Theft (TPFT) Insurance
A mid-tier option being Third-Party Fire & Theft (TPFT) insurance covers:
- Your legal responsibility for damage to other people’s property, and bodily injury or death to others
- Loss or damage to your car only if it is due to fire or theft
3. Third Party Only (TPO) Insurance
Basic and budget-friendly, it covers:
- Your legal responsibility for damage to other people’s property, and injuries/death caused to others.
Choose the right plan based on your car’s market value, your driving habits, and whether the car is financed.
How to Save on Your Car Insurance Premium
- Compare quotes: Use online comparison sites to get the best deal from top insurance companies. Comparing quotes can help achieve a lower premium.
- Maximise your No Claim Discount (NCD): Earn up to 50% off for claim-free driving.
- Avoid unnecessary extras: Only select the add-ons you actually need.
- Opt for an authorised workshop plan: This can lower your premium.
- Low mileage? Save more with an Off-Peak Car.
Understand the Dealer's Sales Strategy
Salespeople are incentivised to sell insurance policies bundled with your vehicle. Here’s what you need to remember:
- You are under no obligation to buy the dealer’s policy.
- Some dealers may suggest penalties for not taking their plan—don’t be pressured.
- Always ask for a breakdown of what’s included in the policy and compare it to other quotes. It's also important to understand if your policy covers motorists who will be driving your car, especially for young and/or inexperienced drivers.
Final Tips: Buying Smart, Driving Safe
- Inform your current insurer if you’re switching vehicles so they can issue a new car insurance policy before registration.
- Save a copy of your insurance certificate to register your car with the LTA.
- Read the terms and conditions, especially regarding excess, coverage limits, and authorised workshops.
Key Takeaways
- Don’t be pressured into buying car dealer insurance.
- Compare car insurance quotes from multiple insurance providers.
- Understand your options—comprehensive, TPFT, and TPO.
- Take advantage of NCDs, safe driver discounts, and tailored coverage.
- Stay informed and in control for better protection and lower annual premiums.
