Choosing the right type of car insurance can be confusing if you’ve never had it before. Essentially, there are a few products you can choose from, including all-risk, TLO (Total Loss Only), and combination insurance.
Each type offers different coverage options for policyholders, which is why the prices vary for each insurance type. If you're considering purchasing car insurance, it's important to understand these three types first. We’ll explain each one’s benefits so you can make an informed decision before buying a policy.
All Risk: A Comprehensive Car Insurance Option
As its name implies, "all risk" insurance offers comprehensive protection. This means claims cover not just minor scratches or dents, but also major damages and theft.
For example, if your car gets a small scratch or dent, the insurance will cover it. Hence, the premium for all-risk insurance is usually higher compared to other types of car insurance.
Here’s what all-risk insurance typically covers:
- Damage from accidents, collisions, overturning, falling, slipping, and impacts.
- Vandalism or malicious damage.
- Replacement of the vehicle if stolen, whether or not force was used.
- Damage from lightning strikes and fire.
- Risks during ferry crossings.
- Damage to wheels from accidents.
- Free towing and transport to the nearest workshop.
The premium for all-risk insurance is divided into three regions and five categories, each with different minimum and maximum limits.
In addition to the benefits mentioned, you can also extend coverage with an additional premium. This might include protection against disasters, terrorism, third-party liability, and more.
Total Loss Only (TLO): Coverage for Significant Damage and Theft
Total Loss Only (TLO) insurance is another option that focuses on covering significant damage or loss. As the name suggests, TLO covers total loss situations, such as theft or damage where the repair costs exceed 75% of the vehicle’s value.
If the damage exceeds 75%, it means the vehicle is severely damaged and no longer usable. Claims include loss due to fire, forcible theft, or disappearance due to theft.
However, it’s important to note that TLO insurance does not guarantee a 100% payout. The replacement value is depreciated from the initial purchase price.
For example, if you bought a car in 2020 for IDR 250 million and it was severely damaged in an accident in 2022, the compensation would not be IDR 250 million. The insurance company will calculate the depreciation of the car's value. If the depreciated value is IDR 200 million, that is the amount you will receive.
You can achieve 100% compensation by updating the policy annually. With different premiums, the coverage can remain at 100% each year.
Like all-risk insurance, TLO premiums are categorized into five categories across three regions. Premiums are determined based on the car’s physical condition, type, age, location, usage, and past claim experiences.
Combination Insurance: A Hybrid of All Risk and TLO
Finally, combination insurance offers a blend of all-risk and TLO coverage, designed to provide effective protection tailored to the policyholder's needs and financial capability.
For instance, you might choose a combination insurance policy for four years, with all-risk coverage for the first two years and TLO coverage for the next two years.
Combination insurance is often chosen for new cars to maximize protection. For example, during the first year, all-risk coverage can be a good choice to keep the car in excellent condition. In subsequent years, TLO might be selected as a more cost-effective option.
However, there are drawbacks. For example, if you choose all-risk coverage for the first two years and TLO for the remaining years, and the car has a 30% damage in the third year, the TLO will not cover such damage.
Choosing the most suitable insurance type requires careful consideration and a detailed review of each option's benefits. It is also important to select the right insurance company to meet your needs within your financial capability.
For instance, if you frequently drive in congested urban areas, all-risk insurance might be a better choice due to its coverage of minor scratches and dents that are more likely to occur.