How P license drivers should look for the right car insurance plan
After passing your driving test and finally getting your probationary driving license (P driving license), it’s only human if you want to buy or rent a car right away, and celebrate your success with family and friends. However, before you begin driving all on your own, there is one step you must take like everyone else who drives - secure car insurance! Many new drivers know very little about car insurance. But worry not; we at Kwiksure will explain all the things about car insurance that new drivers should know about.
Motor insurance falls into two broad categories - third-party casualty and liability insurance (third-party) and comprehensive insurance (comprehensive). Third-party policies offer less coverage than comprehensive policies, accordingly, the premiums are also lower.
A third-party policy mainly covers the loss of life or property damage suffered by a third party. For example, if you accidentally hit a passer-by while parking and need to compensate the other party for their medical expenses, a third-party policy can pay the compensation for you. However, it will not compensate you for the damage to your own vehicle.
In addition to providing the protection offered by a third-party policy, a comprehensive policy will also compensate you for the damage to your own vehicle, such as resulting from your car being hit, burned, stolen, or vandalized. Some comprehensive policies will go further and provide additional support, such as free 24/7 towing. Naturally, if you secure a comprehensive policy, there will be no need to secure a third-party policy anymore, because your comprehensive policy will cover everything covered by a third-party policy.
Hong Kong law requires that all vehicles on the road must be covered by at least third-party insurance to compensate third parties for casualty or loss caused by the vehicle owner. Of course, P license drivers are no exception and must at least secure a third-party policy.
Tips: Whether you should secure third-party or comprehensive insurance depends on how much you can afford and the value of your vehicle. Since P license drivers normally buy used cars, the value of their vehicle is generally lower, and a third-party policy is a sensible choice. But if you are driving a new or relatively expensive model, and wish to have more comprehensive protection for your loved car, you should consider securing a comprehensive policy.
Many people say that it is hard for new drivers to secure car insurance and the premiums are going to be high, but is it true? According to Ken, a motor business manager at Kwiksure, if a driver is at least 21 years old, most insurers will be willing to offer coverage regardless of whether they are a P license holder or not. But drivers under the age of 21, or who drive expensive sports cars, may be denied coverage entirely.
Additionally, P license drivers or drivers under the age of 25 are generally considered to be inexperienced, and usually need to pay higher insurance premiums and a higher deductible for claims. Data show that young drivers or P license drivers are more likely to be involved in road accidents and traffic rule violations, so insurers charge them higher premiums to offset the added risks. Ken points out that there is approximately one compensation claim for every four motor policies (25%) secured via Kwiksure for P license drivers, which is about 15% above the corresponding rate for full-driving license holders.
For those reasons, car insurance premiums for P license drivers are typically two to three times higher than for full license drivers, to offset the higher potential compensation costs. If the deductible and the premium are considered together, the car insurance premium could run as high as HKD $10,000.
There are different methods for lowering premiums as shown below.
Method #1 for P license drivers to lower their premiums: Wait for your turn to get a full license
The first way is to wait until you have held a full driving license for two years before securing auto insurance. In other words, if you just got your P license, you will have to wait three years before you can have your car insurance premiums reduced—you first wait one year to obtain a full driving license, and then you wait two more years so that you will not be considered an "inexperienced" driver.
During this time, it is entirely up to you whether you want to drive or not. Since it is very difficult for the government or any insurer to verify your driving experience, even if you have almost never driven in the past three years, an insurer will still take your "cumulative driving experience" into consideration when making a policy offer to you.
Method #2 for P license drivers to lower their premiums: Become a named driver
If you don't want to wait, you can become a named driver, which means adding your name to the policy of another more experienced driver (such as your father or mother). However, the policyholder should be aware that if a P license driver is added to their auto insurance policy, the premium/deductible will also increase. In addition, if the P driver is involved in a traffic accident, the policyholder will be responsible for processing whatever claims may arise from it, thus taking responsibility for the accident. As a matter of fact, the policyholder may even lose their NCD because of such an accident.
Not surprisingly, some new drivers choose to drive their parents' car without adding their own name to the existing motor insurance policy as a named driver. However, doing so is very risky in reality. If an unnamed, young, and inexperienced driver is involved in an accident while driving another person's car, the insurer may refuse to pay any compensation, or even cancel the car insurance altogether.
Method #3 for P license drivers to lower their premiums: Choose an inexpensive car
A high-performance car, such as a sports car, can attain great speeds, but its maintenance costs are also higher. Moreover, high-performance cars are more likely to be involved in serious accidents, and accordingly, their insurance premiums are also higher. New drivers can consider buying a used car. Although the performance is not as good as what you can get from a sports car, a used car’s insurance premium is typically lower. The most important thing for new drivers is to choose a car model that suits their needs, and accumulate driving experience while driving safely.
Method #4 for P license drivers to lower their premiums: Find the right policy with the help of a reputable brokerage
Although there are many insurers in the market, most of them are unwilling to cover new drivers. Thus, finding the right car insurance policy alone can be a very tedious process, and you may wish to choose a reputable car insurance brokerage like Kwiksure to help out. We work with more than 60 insurers in Hong Kong and understand the ins and outs of different insurance products. Time and again, we have proven to be very capable of helping customers find the right car insurance, and your premium may even be lower than if you locate an insurer by yourself.