Considering Car Insurance and Worsening Roads

Have you noticed that there seem to be a lot of car and traffic accidents these days? If you have, you’re not alone. A recent letter to the editor in the South China Morning Post speculated that any time you choose to drive your vehicle in Hong Kong you have, roughly, an 18 percent change of being involved in an accident.

This year we’ve seen everything from accident involving school children, to double decker buses and delivery vans. As recently as this week a video was uploaded to social media website Reddit.com of a Tesla running into the back of a Taxi while racing at high speeds towards the Airport.

While the trend of fatalities in traffic accidents has been decreasing over the last 5 years, there are still a staggering number of accidents in total. While the transport department publishes only statistics in relation to traffic accidents for which there were no injuries, approximately 81,000 accident reports were made to police in 2020.

Considering that there are around 550,000 vehicles licensed to operate on Hong Kong’s roads then the number of accidents reported compared to the number of vehicles on the road works out to a conservative 14% chance of having an accident. Lower than the number speculated by the letter to the SCMP, but still scary enough.

Car Insurance Coverage Beyond the Requirements

Car Insurance is one of two types of insurance considered to be a mandatory purchase in Hong Kong. The second mandated form of insurance is Employee’s Compensation coverage, which must be taken out by all employers.

This means that without car insurance you will not be able to license your vehicle at the transport department, you will not be legally allowed to drive the vehicle on public roads, and if you get into an accident without car insurance you may be liable to a fine, jail time, or both!

As car insurance is a required form of insurance for licensing any vehicle to operate on Hong Kong’s roads many policyholders do not consider their coverage outside of simply obtaining the lowest possible price. However, this could leave you highly exposed in a claims situation and, according to the statistics, you are likely to have a car insurance claim if you drive for any period of time in Hong Kong.

While Car Insurance is a mandatory form of coverage in Hong Kong there is actually choice for you to select which type of insurance you purchase; not all car insurance is created equal.

Third Party Coverage is the Absolute Minimum

The minimum level of car insurance protection, as mandated by the Hong Kong government is known as Section (II) Insurance, and governs your responsibility towards at-fault accidents in which you have injured or killed a third party, or damaged their property. Consequently, this base level car insurance is often known as Third Party Car Insurance.

Third Party Insurance settles your financial liability to other people following an accident where you are at fault. If another driver is at fault for the accident, their third-party insurance coverage would settle any financial losses you experience. This type of insurance does not cover damage to your own vehicle during an accident, whether you are at fault or not.

Third Party Car Insurance in Hong Kong will cover the policyholder up to HK$ 100,000,000 for any accident involving death or bodily injury to a third party, and HK$ 2,000,000 for property damage.

Under 3rd Party Car Insurance in Hong Kong there is no coverage provided for damage to your own vehicle, and there is no coverage provided against risks like theft. Under this type of policy, you are covered solely for your liability at law towards third party injury and property damage. Because this is the most straight forward option for car insurance in Hong Kong, it generally tends to be the cheapest.

However, with a 14 percent chance of having an accident any time you venture out onto a road, it may not be the most sensible.

Comprehensive Car Insurance Gives Extra Security

All car insurance protection in Hong Kong includes the base Third Party insurance coverage. However, some coverage options will enable you to extend your vehicle’s protection by including Section (I) Insurance. Section 1 Insurance is also commonly called Comprehensive Car Insurance, and provides coverage against loss or damage to your vehicle – even if that damage does not involve another party.

Comprehensive Car Insurance is usually more expensive than a 3rd Party Only policy because it factors in damage to the car you personally own, not just your liability towards other people sharing the road. As such, one of the biggest considerations for this type of insurance is the overall value of your car – the coverage will only offer claims settlement up to this amount.

Because your car’s value plays such an important consideration when it comes to claims, it also stands to reason that this will be a critical variable in establishing the premium of your car insurance policy. Consequently, comprehensive car insurance is normally far more expensive than third party only plans as the value of the vehicle must be taken into consideration – the more expensive the vehicle being covered, the more expensive the policy.

Comprehensive Car Insurance Benefits Beyond Cost

One of the biggest benefits to choosing the more expensive comprehensive insurance for your vehicle in Hong Kong is the fact that you are able to start the claims process prior to the completion of the police investigation – even before anyone has been found at fault for an accident.

This is in stark contrast to a third party only car insurance plan which must have a police report, investigation completed, and a determination of fault before any claims can be processed. As stated above, Third Party Car insurance may be cheaper, but it is only concerned with settling your liability towards other people; even if your car is damaged in an accident, under third party insurance that damage would not be covered under your insurance.

As Comprehensive Car Insurance is able to ensure that you can fix your damaged vehicle, even without access to police documents (which can be frustrating to obtain), any Car Insurance claims situation is often much simpler under a comprehensive product than one which only provides third party coverage. Furthermore, some insurers often package additional benefits under a comprehensive policy which may not be available to third party only policyholders.

These additional benefits can include things like complementary towing services, NCD protection, New For Old clauses (up to 1 year after the vehicle’s first registration in Hong Kong), and possibly even 24/7 road-side services similar to AAA.

Although the price point of a comprehensive car insurance policy in Hong Kong may be off-putting to may people, the simple truth is that with roads showing no signs of becoming significantly safer any time soon, and the ease of convenience offered by this type of coverage as opposed to third party protection, a case has to be made that anyone looking at car insurance should strongly consider comprehensive cover. This is especially true if they are driving a new, or high value vehicle, as the financial consequences of being involved in an accident and having no own-vehicle protection would be devastating.

For more information about car insurance in Hong Kong, or to receive a free quotation please complete the short form at the top of this page. Alternatively, please Contact Us to arrange a no-risk, no-obligation consultation with one of our Expert Hong Kong Insurance Brokers today.

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