What you might not know about the car insurance participation fee

Car insurance participation fee - A little overview

What is the car insurance participation fee? It is the portion of the claim or repair cost that a policyholder pays out of pocket each time a claim is filed.

Is the participation fee different from the premium? Yes, while a premium is an annual payment made by the policyholder to the insurer for coverage, a participation fee is paid at the time of filing a claim. As for usage, the premium keeps the policy active, participation fees make policyholders more responsible, and damage costs are shared.

Why do insurance providers charge a participation fee? There are main reasons why companies charge a participation fee -

• First, to promote responsible driving & vehicle ownership. As mentioned above, participation fees promote accountability among car owners. It is a constant reminder for them to drive carefully and maintain their vehicle well, or they could get involved in an unfortunate incident that would require them to file a claim and ultimately pay the fee.
• Second, it helps providers manage claims. You see, participation fees discourage small, unnecessary claims. By having policyholders contribute a small share of the cost, insurers can manage risk more effectively. Furthermore, it enables providers to keep the premium cost low.

How is the participation fee calculated? In the Philippines, the participation fee is the sum of two of its essential components, i.e., the deductible cost and depreciation fee.

Also Read: Top 8 defensive driving tips for Filipino drivers to stay safe and save on insurance

Different types of car insurance participation fees

What are the different kinds of participation fees a policyholder comes across? Usually, a policyholder pays the following costs when filing a claim: a deductible fee and a depreciation fee; sometimes, both.

Deductible fees

• It is the amount a policyholder pays every time they file a claim involving vehicle damage or loss.
• Depending on the coverage, there can be one or more deductibles.
• It usually applies when you get comprehensive, theft, collision, or damage coverage.
• It applies when the policyholder files a claim for damage to your vehicle, regardless of fault.
• The deductible usually covers vehicle repair costs; the insurer covers anything above that.

Depreciation fees

• It is usually the percentage a policyholder pays for the cost of new parts.
• It only applies when the vehicle is older than 3 years
• The depreciation fee is zero in the case of total vehicle loss.

Common incidents requiring participation fee payment

• When the policyholder is involved in an accident or collision, regardless of who is at fault
• Damages caused by natural disasters like floods, earthquakes, or typhoons

Checking your participation fees

Knowing how to check your participation fees is essential, as it prepares you for the financial stress. Here’s how you can know the charges -

Reading the policy papers: One of the simplest ways to check your participation fees is to review the deductible clause. There, the provider has clearly stated the participation fees. Depending on the provider, it may be expressed as a percentage or in pesos.

Ask directly: If you are unable to find the participation fee amount in the documents, the next best approach is to ask the provider or agent directly.

How to reduce participation fees

Below are some practical tips to manage your car insurance participation fees in the Philippines -

Pay your repair bill: If your car repair costs are less than the participation fee, it doesn’t make sense to file a claim. Saving you from paying participation fees.

Negotiate with the provider: When discussing participation fees, negotiate; you never know when your skills will be needed.

Use surplus parts: If the repair work requires replacing parts, it is recommended to use surplus parts, as they aren’t subject to depreciation.

Go for a fixed deductible fee: Wanna keep your participation fee low? It is recommended to choose an insurance policy with a fixed deductible. However, this could lead to higher premiums.

Misconceptions about the car insurance participation fee

Here are a few common misconceptions that car owners usually have about this particular fee -

Misconception 1. It is a hidden charge imposed by the insurance providers
Truth: The participation fee is not a hidden fee charged by the provider. In fact, if you read the policy, it is clearly stated.

Misconception 2: It is a double payment of the premium
Truth: Policyholders often say we have paid the full premium, and the participation fee is an unfair charge by the insurer. In fact, it is not a double payment; instead, it is a cost-and-responsibility-sharing tool.

Also Read: The rights of a car insurance policyholder in the Philippines

Insurance Commissions take on a participation fee

It is a known fact that the Insurance Commission (IC) is the regulatory body responsible for all insurance-related matters in the country. As for the participation fee, IC’s take is that it should be fair, transparent and disclosed to the policyholder beforehand. In case of any discrepancy, you can always take it up with the authorities.

Bottom line

Every car owner needs to understand the participation fee—its concept and the need to make this payment to the insurance provider. Why? This will help you avoid confusion and financial stress when filing a claim. You see, for a Filipino car owner with insurance, the participation fee isn’t just an extra cost paid to the provider over the premium; it is a symbol of shared responsibility between the car owner and the insurance provider.

Remember to read the fine print, clear up any doubts, and practice defensive driving to make the most of your car insurance policy.

Also Read: Should you get car insurance from your bank, dealer, or a broker? Here’s the answer!

FAQs

Q1. What is a car insurance participation fee?
Ans. The participation fee is the amount a policyholder pays out of pocket when filing a claim.

Q2. What is the usual car insurance participation fee in the Philippines?
Ans. Usually, the participation fee is around 1% of your claim amount; however, it may vary depending on the insurance provider.

Q3. Is it mandatory to pay a participation fee?
Ans. Yes, a policyholder must pay a participation fee if the claim is approved.

Q4. Do I have to pay a participation fee even if I’m not at fault in the accident?
Ans. Yes, unless the other party's insurance is taking full responsibility.

Q5. Can the insurance provider waive participation?
Ans. In most cases, a participation fee is required; however, some insurance providers might waive it for small claims or loyal customers.

Q6. Do participation fees increase after filing a claim?
Ans. Frequent claims filing may raise your premium but not directly affect the participation fee.

Q7. Is there a separate fee for filing claims under Acts of God coverage?
Ans. Insurance providers usually require policyholders to pay a participation fee. The amount is usually the same for all coverages, be it Acts of God or Own Damage. The amount, however, can vary depending on your insurance provider.

Q8. Is the participation fee part of the deductible charged by the provider?
Ans. The participation fee equals the sum of the deductible and depreciation.

Q9. Can I check the participation fee online?
Ans. Yes, nowadays insurance providers are going digital, allowing clients to check information & do essential tasks via a dedicated application or portal.

Q10. How can I avoid paying a high participation fee?
Ans. Choose policies with fixed low fees and try to maintain a safe driving record.

Q11. Do all insurance companies charge the same participation fee?
Ans. No, the participation fee isn’t always the same; it usually varies with insurance providers.

Q12. Is the participation fee refundable?
Ans. No, the participation fee is not refundable even if your claim gets approved by the insurer.

Q13. What are the consequences of not paying the participation fee?
Ans. If the applicant does not pay the participation fee, the provider won’t approve the claim, meaning no settlement amount will be paid.

Q14. Can we negotiate a participation fee?
Ans. A policyholder can try to negotiate participation at the time of insurance renewal.

Q15. Does CTPL insurance have a participation fee?
Ans. Usually, CTPL insurance does not have a participation fee. It is generally associated with optional coverages, such as comprehensive insurance and add-ons.

Also Read: Insuring a hybrid or plug-in car: What you should know before buying one