Some people may still think that they don’t need to buy vehicle insurance so that the installments become more affordable. In fact, when you decide to buy a vehicle, it means that you have to be ready for all the risks that will happen in the future, such as collisions, scratches, slips, and stolen. Therefore, do not consider motor vehicle insurance as a burden. In fact, it can be a help when needed. Like a car spare tire that is prepared so that it can be used at any time in an emergency.

Motor vehicle insurance is an insurance that provides protection against loss and or damage to vehicles for various reasons mentioned in the insurance policy. Generally, several reasons for the incident that are borne by the insurance company against the object of motorized vehicles, both four-wheeled and two-wheeled vehicles, include:

● Collision/crash
● Fall down
● Criminal acts
● Stolen
● Fire

As is known, there are two types of motor vehicle insurance. First, comprehensive insurance or it is called all-risks protection even though some insurance companies do not use this term. The second one is total loss only (TLO) insurance. From the meaning, we can actually guess the difference between the two.

TLO insurance vs Comprehensive insurance (All Risks)

Comprehensive insurance provides comprehensive protection which also includes protection provided by TLO insurance. On the other hand, TLO insurance only provides partial protection from comprehensive insurance. This is the difference between comprehensive insurance and TLO insurance. TLO Insurance only guarantees compensation for the cost of compensation if the object of insurance is damaged equal to or more than 75 percent of the actual price.

The percentage is determined based on a separate calculation from the expert. In simple terms, the damage is equal to or above 75 percent when the vehicle can no longer be used normally. It is different if the car is lost due to plunder or theft. It is certain that you have lost over 75 percent. However, 100 percent TLO insurance coverage is often misunderstood by consumers. 100 percent coverage applies if you make a TLO insurance claim based on the market price of the motor vehicle at the time of the loss.

For example, you bought a Hyundai Grand i10 car for Rp.145 million in 2015. Then in 2016 there was a loss. The insurance company will replace the lost car according to the same type and year of production as the lost car. This means that when you make a TLO insurance claim, it does not mean that you will get a new car from the factory. But cars that are equivalent in price, year of production, and type with rs that are lost or damaged are more than 75 percent.

The protection is only 75 percent damage and loss. Meanwhile, for minor damage such as scratches or dents there will be no replacement. So, what’s the benefit of TLO insurance? One of them is the TLO insurance premium, which you have to pay, is much cheaper than comprehensive insurance.

Motor vehicle insurance options

One of the insurance options that can be selected is from ABDA Motor Vehicle Insurance. This insurance product, presented by PT Asuransi Bina Dana Arta Tbk has protection benefits for vehicles, especially cars. ABDA offers two options for car insurance products, namely comprehensive insurance (all risk) and total loss only (TLO) vehicle insurance. The advantages of ABDA car insurance are the availability of a 24-hour Road Side Assistance service that helps with tire changes, gasoline, and emergency support when keys are left inside the car.

Meanwhile, the expansion of the coverage or the addition of clauses in the vehicle insurance policy can cover the risk of damage in certain situations. Therefore, study the insurance policy carefully, so that you get the maximum benefit and protection from the vehicle insurance product that you have.

When is the right time to have a comprehensive insurance coverage?

We recommend that you include the comprehensive insurance when you just buy a brand new car. Meanwhile, TLO insurance is more suitable for used vehicles or vehicles that are under 10 years old. The advantage of comprehensive insurance clearly provides comprehensive protection. Starting from collisions, dents, scratches, and even losses. Some motor vehicle insurance includes expansion products such as losses due to natural disasters, terrorism, and losses caused by riots.

For example, if you are caught in a sea of raging football fans that damage your vehicle, you can file a claim for damage caused. That way, you will be calmer about having vehicle insurance for whatever risks you have to face at a later date.

What determines the price of vehicle insurance premiums?

According to the Financial Services Authority (OJK), there are several factors that affect the price of vehicle insurance premium, including the following:

● Type of the vehicle (which will determine the price of the vehicle)
● The physical condition of the vehicle
● Vehicle age
● Location
● Functions and usage
● Type of coverage, and
● Experience of loss(es)

Well, from some of these factors it becomes clear why the locations where vehicles are used also affects the price of the insurance premium. For example, Jakarta as the capital city may have a greater risk compared to other regions. That is why motor vehicle insurance premiums in each region vary.

Motor vehicle insurance is not only required individually, but is also required by companies or financial institutions that provide motor vehicle ownership credit. That is why motor vehicle installments generally include the cost of insurance premiums so that the nominal is bigger.

For lending companies it is very important to maintain assets as long as credit installments have not been paid off. Another case if the motor vehicle has been paid off, the credit company no longer has the obligation to reinsure it. This will become the authority of the vehicle owner. Usually, vehicle installments are completed in year 3 or year 5. Stepping on the following year, vehicle owners can extend motor vehicle insurance in accordance with the applicable terms and conditions.

Deductible fee, costs for filing claims due to partial or total damage

What you need to know in vehicle insurance is that there is a deductible fee per incident. For example, if your vehicle is dented, the insurance company will not necessarily provide compensation or repairs. However, you will be asked to pay a certain amount when making a claim.

The amount of deductible costs on average is around Rp300.000 per incident. This deductible or reduction fee actually has its own purpose. Among other things, so that vehicle owners can be more careful when driving a vehicle. In addition, so that there is no claim process where the loss value is smaller so that it repeatedly submits claims.

Well, the table below can be used as a guide for calculating motor vehicle insurance premiums for both comprehensive insurance and TLO insurance.

Table 1 – Indication of the comprehensive insurance premium rate

Table 2 – Indication of the TLO insurance premium rate

Region 1: Sumatra and surrounding islands.
Region 2: DKI Jakarta, West Java, and Banten.
Region 3: Other than Region 1 and Region 2.

Example of comprehensive insurance calculation

For example, if your car was purchased for Rp159 million in DKI Jakarta. The insurance company that you use charges a premium of 2.5% of the price of the car (sum insured).

The formula is 2.5% x Rp159,000,000 = Rp3,975,000

So, you have to pay Rp3,975,000 per year to get comprehensive insurance benefits (excluding admin fees).

Example of TLO insurance calculation

For example, suppose you buy a car in DKI Jakarta for Rp150,000,000
The insurance company you choose sets the TLO insurance premium at 0.78%
Then the TLO premium payment calculation is as follows;

Rp150,000,000 x 0.78% = Rp1,170,000

So, the premium paid per year is Rp1,170,000. When compared to comprehensive insurance premium, it is much cheaper?

Motor vehicle insurance is very useful if you see some of the benefits provided. It’s just that, as a consumer you are also required to be smarter in choosing the best vehicle insurance according to your needs. Including, understanding some required compensation, such as the obligation to pay deductible fee or own risk.

Basically, this motor vehicle insurance product will make you calmer and more careful in driving. That way, you too can be safe on your way. Now you can choose one of them or choose combination insurance, which combines the benefits of both.

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