No car, no problem: Why ‘Loss of Use’ coverage matters

Car Insurance in the Philippines - An overview

What does a standard car insurance policy cover? That’s often the first question that pops up in the mind of a car insurance applicant. A standard car insurance policy typically includes Compulsory Third Party Liability (CTPL) insurance, which is required by law for all motor vehicle owners. It offers protection against third-party injury or death, and nothing else, whether it be your car repair or medical bills.

This limited coverage prompts many to opt for comprehensive insurance, which offers wide protection against theft, fire, flood, vandalism, and other risks. However, it does not include the transportation allowance while your car is getting repaired.

Common misconception about car insurance

Many believe that CTPL + Comprehensive insurance provides them with complete coverage; unfortunately, that is not the case. Even after opting for this combination, several coverage gaps remain. For instance, this duo will not cover daily transportation expenses when you are without a vehicle, emergency towing, or fuel delivery. This is where essential add-ons, such as ‘Loss of Use’ and ‘Roadside Assistance,’ come in, offering you the much-needed support.

While we have already discussed the latter coverage in our previous blog, it is time to delve deeper into the former.

Loss of Use coverage

What is loss of use coverage? It is an add-on car insurance coverage that offers a transportation allowance when your car is unavailable due to an accident and is under repair, as covered by your policy.

Typical reimbursement offered -

The value this add-on offers comes in the form of daily reimbursement. Here, you need to understand two key concepts: the reimbursement amount & reimbursement period.

While the former refers to the amount offered to cover your transportation expenses, like taxi and rideshare fare, while the car is being repaired. The latter indicates the timeframe of the reimbursement.

Let us understand via an example -

Your car is under repair, and your insurer is providing you with a PHP 300 daily allowance for up to 15 days. In total, you’ll receive PHP 4,500 in support, which is sufficient to cover alternative ride options, such as taxi or Grab rides.

Also Read: Filing a car insurance claim: Key coverage you’ll need after an accident

Do you need ‘Loss of Use’ coverage?

First, let us go through the typical scenarios when your car is in the repair shop. It can be due to damage caused by an accident, flood, attempted car theft, riot, or other similar events. The reason could be any, but what remains common is that you are taking alternative transportation to reach work or running errands.

Now, with ‘Loss of Use’ coverage by your side, you benefit from the following -

• Convenience, no stress commute; in short, complete peace of mind - No worries about the extra cost of commuting, leaving your focus on work and family intact.
• Financial relief - Without the allowance, all the commuting expenses (taxi/Grab/car rental fare) will fall upon your shoulders.

How to get ‘Loss of Use’ coverage?

If you are convinced about getting ‘Loss of Use’ coverage, then here’s a quick briefing on the process.

Step 1: Choose a reputable car insurance provider
If you are a new or first-time car owner seeking optimal insurance, consider a well-established insurance provider. A few top names in the business include AXA Philippines, Malayan Insurance, and Pioneer.

Step 2: Ask about available coverage options
In addition to comprehensive insurance and its inclusions, it is crucial to inquire about the offered add-ons. You will notice that most insurers do not include ‘Loss of Use’ coverage in their standard packages; therefore, a specific query about this coverage needs to be raised from your end.

Step 3: Compare coverage & quotes
Before finalising your deal, it is recommended that you compare quotes from at least two to three providers. Talking specifically about the ‘Loss of Use’ coverage, the allowance can range from PHP 300 to PHP 1000 per day. Additionally, the duration of the allowance varies, so please make your decision carefully.

Step 4: Add the coverage when buying or renewing a policy
Once you are done with the research work, it is time to get the ‘Loss of Use’ add-on included in your policy. If you missed this option when purchasing the policy for the first time, you can still do so at the time of renewal.

Step 5: Read the fine print
Always read the fine print before finalising and signing the policy. Please review the exclusions, maximum allowance days covered, claim filing deadline, and other relevant details.

How much does ‘Loss of Use’ coverage cost?

The ‘Loss of Use’ coverage is not a stand-alone policy but an add-on to the comprehensive insurance plan. The cost of this add-on is a small part of your overall comprehensive insurance premium. Please note that your final premium depends on several factors and may vary between two policyholders. Some common factors influencing the cost are -

• Car make, model, and year
• Car’s fair market value
• Frequency of usage
• Safety features
• Car accessories
• Insurance provider

Also Read: Don't panic after an accident — Here's how to file a comprehensive claim

Filing ‘Loss of Use’ coverage claim - Process & requirements

Let us start by discussing the step-by-step process of filing a ‘Loss of Use’ claim -

Step 1: Notify the insurer about the incident, ensuring everyone's safety & calling for medical help if required.
Step 2: Click photos of the damage and accident scene.
Step 3: Gather the required documents for filing the claim (confirm with your insurer/agent/policy).
Step 4: Complete the claim form accurately and submit the required documents.
Step 5: Cooperate with the adjuster; provide the required details, be truthful.
Step 6: Wait for approval.
Step 7: Get daily allowance.

Documents required

• Photocopy of the insurance policy
• Driver’s license
• OR/CR
• Police report
• Repair estimate

Tips to maximise ‘Loss of Use’ coverage

• Prepare all the required documents in advance.
• Inquire about the reimbursement amount and period beforehand.
• Make sure to read the fine print and understand policy exclusions.

Bottom line

Car insurance is a crucial part of being a car owner; you need it for multiple reasons, like legal requirements, financial protection, and peace of mind. One such essential coverage that will keep your life moving even after an accident, when the car is out for repair, is the ‘Loss of Use’ coverage.

You see, in the Philippines, the rising rate of accidents and the communication cost have made the ‘Loss of Use’ coverage ensure that you aren’t burdened with the extra expense. All it takes is adding a little bit to your premium, and you’ll gain financial relief and a whole lot of convenience.

Also Read: A simple guide to car insurance endorsement in the Philippines

FAQs

Q1. How does the car insurance claim process work in the Philippines?
Ans. The car insurance claim process involves the following steps: gathering evidence, notifying the insurer, cooperating with the adjuster, and waiting for the claim to be approved.

Q2. What are car insurance deductibles?
Ans. A deductible is the amount paid by the policyholder from their pocket before the insurance settlement covers the rest of the claim. As for its impact on the premium, a higher deductible results in a lower premium and vice versa.

Q3. What is car insurance Loss of Use coverage?
Ans. Loss of Use coverage covers your transportation expenses when your car is being repaired under a covered claim.

Q4. Is Loss of Use coverage mandatory in the Philippines?
Ans. No, in the Philippines, only CTPL insurance is mandatory; the rest of the coverages are optional.

Q5. How much daily allowance can be expected under Loss of Use coverage?
Ans. The allowance can range from a few hundred to thousands of pesos, depending on the insurance provider.

Q6. Does Loss of Use coverage cover parking fees and fuel costs?
Ans. Usually, Loss of Use coverage only compensates for transportation expenses, such as taxi and car rental fees.

Q7. What documents are required for filing a Loss of Use claim?
Ans. A policyholder needs to submit the following documents: driver’s license, OR/CR, a duly accomplished claim form, insurance policy, and an estimate of repair cost.

Q8. For how long can a policyholder claim Loss of Use coverage?
Ans. It depends on the insurance provider.

Q9. How soon should I file a claim?
Ans. It is recommended to file a claim as soon as possible after the accident, ideally within 24 to 48 hours.

Q10. Does car insurance coverage apply if the insured car gets stolen?
Ans. Yes, given that the insurance policy includes comprehensive coverage.

Q11. Do all insurance providers offer Loss of Use coverage?
Ans. Not all, it is therefore suggested to ask about the policy inclusion and exclusion beforehand.

Q12. I only have CTPL insurance. Can I claim Loss of Use coverage?
Ans. No, you can only claim Loss of Use coverage if you have opted for comprehensive insurance.

Q13. Is it suggested to file a claim if I have already had my car repaired?
Ans. Usually, no, as often policyholders require approval from the provider before the repair begins.

Q14. Can I file a claim if I was at fault for the accident?
Ans. Yes, given that you have comprehensive insurance.

Q15. Will filing a claim affect my insurance premium?
Ans. Filing frequent or at-fault accident claims can affect your premium.

Also Read: Total loss for car owners: A guide to insurance claims & settlements