Thursday, May 10, 2018

Third Party Liability Versus Comprehensive Car Insurance

A few years ago, my husband and I decided to buy a second hand 1997 Mazda car from a random seller. It was cheap and it was the car that my husband really wanted so without a doubt, we bought it. I remember asking my hubby if we needed to buy a car insurance for it. He said there’s no need because there’s already a car insurance included when he registered the car in the Land Transportation Office (LTO). Clueless me did not think about it more thoroughly because I don’t drive the car and when he says there’s an insurance, I just left it at that.

We were on the road one time, just me and him, simply driving on South Superhighway going to Makati. There was a truck in front of us just running a little faster than the average speed. Everything was okay until suddenly a metal shrapnel just came off from the back of the truck. I don’t even know how or why it happened, but it just did and that metal shrapnel hit our windshield leaving a  visible light scratch.

We were fazed by what happened, but we didn’t stop because we were indeed in the middle of a highway and technically there was no harm done. But that incident opened up a discussion between us about our current car insurance. I asked my husband, “Okay, if something like that happens next time resulting in a greater damage, would our car insurance help us with that?” He simply said no. I shockingly asked, “What? Why not?” “Because it’s TPL.”, he said bluntly.

I was even more confused. When we got home, I did a research about what TPL means. TPL stands for Third-Party Liability. It is a car insurance required by our government for vehicle owners to have even if one already has a comprehensive car insurance.

That simple incident that happened to us is just proof that accidents happen regardless of how skilled nor how protective a driver is, and having a car insurance is a sure-fire way to manage risk. If you insure your car, you are getting protection from unexpected expenses such as your car getting damaged, stolen, or when a rider and driver gets injured. Bottom line is that your car insurance is meant to spare you from spending thousands of pesos on hospital bills or repairs.

Car Insurance according to an insuring company is a contracted policy purchased by a vehicle owner where the insured pays a certain amount in exchange for coverage given by the insurance company. The scope of coverage depends on the policy purchased. It can be as simple as coverage for bodily injury and death of a third party, to more complex protection against loss of property, personal injury, theft, and more.

Philippine law requires all vehicle owners to purchase a compulsory Third Party Liability (TPL) insurance policy before they register or renew their vehicles at the LTO. TPL provides compensation to the third party in case of an accident. Comprehensive car insurance can also be purchased for extra protection but isn’t required by law.

So in our case, TPL is what we had and we didn’t get a comprehensive car insurance. TPL only covers third-party liability. I also discovered that third-party liability only covers injuries or death of a third party. It does not cover personal injury or death of the insured, or any injuries or death of family and employees. It also does not cover damages to the insured vehicle or property damage to a third party, which explains why my husband said no when I asked him if  our insurance would cover the damage that would incur to our own vehicle.

After educating myself with all this car insurance policy in the Philippines, I convinced my husband that we should get a comprehensive car insurance from a reputable company just for our own peace of mind. We would want a policy that would cover vehicle damage and/or injuries to both parties. He concurred that we do need it, but he said to give him a few months until he could afford it. Getting a comprehensive car insurance will indeed cost us more money and so we have to prepare financially.  It will cost us, but if it’s for our peace of mind, we were willing to do it.  

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