Hong Kong Car Insurance Premium Guide | Money Saving Tips

Many people believe that car insurance premiums in Hong Kong are calculated based primarily on the vehicle type and the driver's age. However, the reality is that it depends on several important factors, and quotes from different insurers can differ by thousands or even tens of thousands of dollars. These factors include engine displacement, driving history, and traffic violations. Even a single ticket can lead to an increase in your premium. In this article, we at Kwiksure will break down the 5 major factors that affect your premiums and share 7 tips to save on insurance costs.

Types of Car Insurance in Hong Kong

Under Hong Kong law, all vehicles operating on the road must have car insurance. Currently, the car insurance market in Hong Kong mainly offers two types of plans: Third Party Liability Insurance (commonly called 'TP') and Comprehensive Insurance (commonly called 'Full Coverage'). Vehicle owners can choose based on their personal needs and budget.

Third Party Liability Insurance (TP)

This is the most basic legal requirement, primarily covering the compensation liability for damage to third-party property or personal injury caused by the insured vehicle. Although the premium is relatively low, the coverage is limited and does not include damage to the insured's own vehicle. This type of insurance is more suitable for older or used cars, as the repair costs for these vehicles may exceed their market value.

Comprehensive Insurance (Full Coverage)

This offers more extensive protection. In addition to basic third-party liability coverage, it also includes protection against accidental damage, theft, and even losses due to natural disasters for the insured vehicle. Although the premium is higher, comprehensive coverage provides better protection for new or more expensive vehicles. Additionally, many car dealerships require buyers to purchase comprehensive insurance when applying for installment payments to protect the interests of all parties involved.

Impact of Engine Displacement on Insurance Premiums

Engine displacement is one of the important factors affecting car insurance premiums. A larger engine displacement means greater power output, which also leads to higher repair costs and potential risks, thus directly affecting the calculation of premiums.

The insurance industry generally puts private cars into three main categories based on engine displacement:

• Small cars with an engine displacement of 1,650 c.c. or below
• Medium cars with an engine displacement from 1,651 c.c. to 3,500 c.c.
• Large cars with an engine displacement above 3,500 c.c.

Small cars typically have lower repair costs and cause relatively minor damage in accidents, resulting in cheaper premiums. Medium cars are the most common category, with moderate premium levels. In contrast, large luxury cars have expensive parts and require higher expertise for repairs, naturally leading to higher premiums.

It is worth noting that with the increasing popularity of electric vehicles, the insurance industry has begun using kilowatts (kW) instead of the traditional cubic centimeters (c.c.) as the basis for calculation. However, the fundamental principle remains the same: the greater the power output, the higher the premium.

Traffic Violation Records and Their Impact on Insurance Premiums

There are claims that traffic violation records can affect insurance premiums, leaving many vehicle owners confused. In reality, not all traffic tickets will lead to an increase in premiums. Under the general guidelines in the insurance industry, serious traffic violations—such as speeding by over 15 km/h (which results in a deduction of 3 points), dangerous driving, driving under the influence, driving without a license, and hit-and-run incidents—will affect the premium calculations for the following year. Insurers pay special attention to these violations because they often reflect the driver's habits and risk awareness.

On the other hand, some minor violations, such as slight speeding (by less than 15 km/h), illegal parking, failing to wear a seatbelt, general traffic sign violations, or exceeding emission limits, usually do not directly affect the premium calculations. However, vehicle owners should know that even minor violations, if committed too many times, may still be considered by insurers when assessing risk.

Violations That Will Not Affect Insurance Premiums

• First-time speeding
• Minor speeding (by 15 km/h or less, where a fine of HK$320 is payable but no points are deducted)
• Failure to wear a seatbelt
• Illegal parking
• Exceeding emission limits or causing noise pollution
• Failure to follow certain road signs, such as 'No Waiting' and 'Disabled Parking Only'
• Littering

5 Key Factors That Affect Insurance Premiums

Car Model and Age

The model and age of your car often directly affect your insurance premium. Generally speaking, luxury vehicles tend to have higher premiums due to the higher costs of parts and repairs compared to more mainstream vehicle models. Additionally, the age of the vehicle is an important consideration—new cars typically enjoy lower premiums primarily because their components are more reliable, resulting in a lower chance of breakdowns or repairs. However, for vehicles older than 7 years, the risk of part wear increases, which may result in higher premiums.

Driver Background

The personal background of the driver is also crucial. Vehicle owners with three or more years of driving experience generally pay lower insurance premiums. Industry data show that drivers aged 25 to 65 are most likely to get reasonable quotes, as drivers in this age group tend to be more mature and responsible, resulting in a lower risk of accidents. In contrast, new drivers under 25 or seniors over 65 often pay higher premiums.

Driving Mileage

Driving mileage is another important indicator that insurers use to assess risk. The higher the annual mileage, the more time spent on the road, which increases the likelihood of accidents. Typically, private cars that are driven less than 15,000 km per year are more likely to get discounted premiums. The primary parking location of the vehicle can also affect the premium—parking a vehicle in a private lot with security is clearly safer than parking it out on the street, resulting in lower insurance costs.

Insurance Record / Claims Record

Insurance records and claims history are crucial. Car owners who have not made any claims for several consecutive years can enjoy significant premium discounts through a No-Claims Discount (NCD). Each insurance company calculates NCD differently, but generally, car owners with five consecutive years of zero claims can receive up to a 60% premium discount. However, once a claim is made, the NCD will be reduced, leading to an increase in the premium for the following year.

Occupation / Driving Habits

Insurers have strict regulations regarding the use of the insured vehicle. For example, if you purchase private car insurance but use the vehicle for commercial purposes, such as delivery, you would be in breach of the contract. In the event of an accident while making deliveries, the insurer would have the right to deny your claim.

Therefore, when signing an insurance policy, be sure to clearly state what the vehicle is to be used for. In some cases, you may need to pay a higher premium, but the additional cost will certainly be much less than the expenses you would incur by concealing the vehicle’s purpose and thus having to pay for the repair yourself.

Strategies for Saving on Insurance Premiums | 7 Practical Tips

If you want to save on insurance premiums, strategy and timing are crucial. Here are 7 tips from industry experts that can help you lower your insurance expenses easily.

• Based on insurance industry data, the peak season for purchasing insurance is from September to November. During this time, insurers often offer attractive promotions to compete for market share. It’s advisable to start comparing quotes from different insurers about two months before your policy expires to make good use of the best negotiation opportunities. Experienced car owners know to use the end of the month or quarter, when insurers are eager to boost their sales figures, to ask for lower quotes.

• Making good use of the no-claims discount (NCD) is key to long-term savings. Car owners who have not made a claim for over five years can enjoy a premium discount of up to 60%. Thus, for minor repairs, we suggest paying out of pocket to preserve your valuable NCD. There are also optional protections available, such as 'NCD Protection,' which allow you to keep your current NCD level even after making a claim. Although this may involve a slight increase in premiums, it is well worth the money in the long run.

• Choosing an appropriate deductible can effectively lower your premiums. A deductible is the amount of compensation that the insured person must bear themselves when an incident occurs. Generally, increasing the deductible can lower premiums by 20-30%. However, it's important to balance the risk, and it is advisable to decide on a suitable deductible amount based on your financial situation and driving habits.

• Making good use of 'bundled insurance discounts' is another great way to save money. Many car insurers also offer products like home insurance and health insurance; if you purchase multiple insurance products at the same time, you can typically receive extra discounts. Some credit cards or membership programs also provide exclusive offers, and creatively using these discounts can often lead to significant savings on premiums.

• Regularly reviewing your insurance coverage is equally important. As the age of your vehicle increases, you might consider switching from comprehensive coverage to third-party coverage, since repair costs for older cars may exceed their market value. Additionally, some non-essential add-ons, like rental car coverage and parts upgrade coverage, can be included or excluded based on your actual needs.

• Purchasing insurance online can often save you money compared to purchasing via traditional channels. Insurers often make exclusive online offers to encourage customers to use their platforms, with discounts sometimes reaching 15%. However, carefully read the coverage details before purchasing online to ensure you understand all the terms.

• Maintaining a good driving record is undoubtedly the most effective way to lower your premiums. Avoiding traffic violations, keeping a safe following distance, and obeying traffic rules not only ensure safety but also help maintain a good insurance record, allowing you to enjoy better premiums in the long run.

Frequently Asked Questions

Should I opt for full coverage or third-party coverage when purchasing a new car?

For new cars, it is recommended to opt for full coverage (comprehensive insurance). There are three reasons for this: First, new cars have a high value, and repair costs can be substantial in the event of an accident. Second, many dealerships require full coverage for new cars, especially for vehicles purchased on installment plans. Lastly, the premium for full coverage is relatively low for new cars, offering good value for money. However, once the car is over 5-7 years old, you may consider switching to third-party coverage to save on premiums.

How can I switch insurers and keep my NCD?

When switching insurers, as long as you can provide a 'No-Claims Discount (NCD) certificate' from your current policy, the new insurer will usually recognize your NCD level. It is advisable to request this certificate at least one month before your current policy expires to ensure a smooth transition. It’s worth noting that some insurance companies may require a review of your claims history over the past three years to ensure accurate risk assessment.

Will the insurance premium for electric vehicles be cheaper?

Not necessarily. Although electric vehicles have simpler engines, the costs of repairs and replacement parts (especially for the battery pack) are often higher. Additionally, since electric vehicle technology is relatively new, there may be fewer repair technicians and parts supplies, which can indirectly affect repair costs. Insurance companies will consider factors such as the vehicle's value, performance, and repair costs to determine the premium.

Does using a vehicle as a ride-hailing car affect the insurance premium?

Definitely. If a private car is used for ride-hailing services, it must be reported to the insurance company and switched to the appropriate commercial use insurance. Generally, commercial use premiums are 25-40% higher than private use premiums. However, if you didn’t report and an accident occurs, the insurance company may refuse to pay out, which can have serious consequences.