There are typical questions one may ask about their coverage or specifics on the policy they’ve acquired. Among these questions involve the car insurance participation fee.
"How much is the participation fee in car insurance?" "How much is a deductible in the Philippines?" "Who pays for the participation fee?"
Still have a vague idea of this insurance cost? Here’s what you need to know about the car insurance participation fee in the Philippines.
What is Participation Fee in Car Insurance?
A participation fee is an amount you pay out of pocket to your car insurance provider every time you make a claim before the insurer shoulders the rest of the claim value. Participation fee payment is one of the requirements for most types of car insurance claims.
As a policyholder, you're required to "participate" in your car insurance cost. Essentially, this means you share in the expenses for repairing your damaged vehicle after an accident.
Why Do Car Insurance Providers Charge a Participation Fee?
Car insurance companies require their clients to pay participation fees once they file a claim for vehicle loss or damage, like during the aftermath of Typhoon Ondoy in 2009 when claims spiked in Metro Manila.
Car insurance providers charge a participation fee for these reasons:
- The driver is liable for any vehicle damage in an accident.
- Participation fees discourage people from committing fraud when filing a claim.
- This fee prevents car owners from abusing their insurance benefits by claiming minor vehicle damage.
Types of Car Insurance Participation Fee in the Philippines
Generally, participation fees in the Philippines cover the deductible fee, depreciation fee, or both. These costs are deducted from the proceeds of your claim.
When choosing a car insurance policy, it's important to look beyond just the premium and take into account other fees like the participation fee. Some car insurance providers, like Prudential Car Insurance, FPG Car Insurance, and Mercantile Car Insurance, offer policies with lower participation fees that can help you save money in the long run. By comparing policies and fees from different insurers, you can find the best car insurance coverage that fits your budget and needs.
📌 Deductible Fee
What is a Deductible in a Car Insurance Claim?
A deductible fee is what you pay for every filed incident involving vehicle damage or loss. Depending on your car insurance coverage, there can be one deductible or more. However, not all policies have deductibles.
A deductible is typically selected when you get comprehensive, collision, and theft/own damage coverage. Some cases that qualify for deductibles are when you get personal injury protection coverage.
Deductibles come into play when you find yourself at fault in a car accident, and you have the coverage mentioned above. Your vehicle repairs will come out of your deductible amount, which is typically out of pocket. Anything above that, or above the car’s fair market value (FMV),[1] will be covered by your insurance company.
How Much is a Deductible Fee for Car Insurance?
Here are the standard car insurance deductibles in the Philippines:
📌 Depreciation Fee
What is Depreciation Fee for Car Insurance?
A depreciation fee is a percentage you pay (depending on your car's age or depreciated value) for the cost of new parts to replace damaged ones. Meaning, you're paying the difference in the value of an auto part at the time you bought the car and its value at the time it's replaced.
This type of car insurance participation fee applies only to vehicles older than three years. There's no depreciation fee for total vehicle loss.
Here's the depreciation schedule that car insurance companies use to compute a policyholder's share of the replacement part cost:
How Much is the Participation Fee in Car Insurance in the Philippines?
Car insurance participation fees in the Philippines cost at least ₱2,000 or ₱3,000, depending on the vehicle type, fair market value, and age.
How to Compute Your Participation Fee in Car Insurance
Here are the steps to easily calculate how much car insurance participation fee you're going to pay for your claim:
- Compute your deductible fee. Multiply your car's FMV by 0.5% or 1% (depending on vehicle type). If the resulting amount is higher than ₱2,000 (or ₱3,000 if you own a commercial vehicle), that's your deductible fee. Otherwise, you should pay only the minimum deductible fee.
- Compute your depreciation fee. Multiply your vehicle repair cost or replacement part cost by the corresponding rate in your policy's depreciation schedule. For example, if your car is four years old, your depreciation rate is 20%. Skip this step if your vehicle age is three years or less.
- Compute your participation fee. Add your deductible fee and depreciation fee (if any) to determine how much participation fee you must pay.
So that it's easier to remember how to compute the car insurance participation fee, here are the formulas you can refer to.
Deductible fee = Fair market value x 0.5% (private car) or 1% (commercial car)
Depreciation fee = Cost of repair or replacement part x Depreciation fee rate based on vehicle age
Participation fee = Deductible fee + Depreciation fee
Sample Participation Fee Computation
For example, your four-year-old sedan with a fair market value of ₱1 million figures in an accident, and the replacement cost for a damaged part is ₱10,000.
Here's how to compute your car insurance participation fee:
- Deductible fee: 0.5% x ₱1 million = ₱5,000
- Depreciation fee: ₱10,000 x 20% = ₱2,000
- Participation fee: ₱5,000 (deductible fee) + ₱2,000 (depreciation fee) = ₱7,000
This means if you're making a claim for ₱10,000 to have your damaged car part replaced, you'll have to pay the participation fee of ₱7,000, and the rest (₱3,000) will be shouldered by your insurance company.
How to Save Money on Car Insurance Participation Fee
Fortunately, there are different ways to cut down on your participation fee when making a claim. Here are some of them.
1. Consider a Fixed Deductible Fee
If you're trying to keep your participation fee low, get a car insurance policy with a fixed deductible of around ₱2,000 to ₱3,000. However, choosing a fixed deductible can lead to a higher premium.
On the other hand, a higher deductible will mean a lower monthly premium, and you can opt for it to save money. But this is where your driving habits and typical routes come into play. If you travel along congested roads and accident-prone roads, a lower deductible may be a better option in the long run.
Still, the biggest determining factor is whether or not you have the money to pay off the repair bill if you get into an accident.
2. Pursue Your Claim Against the Third Party If You Aren't at Fault
If another person caused the accident, you can avoid paying the participation fee (or get a refund) by pursuing your claim against the insurance provider of the third party. In such a case, your insurance company will issue a Certificate of No Claim.
3. Use Surplus Parts for Repair
You can avoid paying the depreciation fee by using surplus parts (ideally bumpers, doors, or fenders)—which aren't subject to depreciation—instead of brand-new parts. When you do, make sure to inform your insurance provider about it.
4. Pay for the Repair Bill by Yourself
When your participation fee is higher than the repair cost, it doesn't make sense to make a claim for car insurance. In such a case, you're better off taking care of the repair bill on your own.
FAQs on Car Insurance Participation Fee
1. Who pays for the participation fee if I'm not at fault?
The deductible fee kicks in only when you figure in an accident AND you're at fault. If it's verified that you aren’t at fault, a process called subrogation happens. Here, the other party’s insurance company will reimburse you through your insurance provider, if the investigation and subrogation are successful.
2. Can I get a lower deductible?
Car insurance companies don't allow a lower deductible because the Motor Tariff already prescribes the minimum deductible fee for vehicles in the Philippines. However, you can increase your deductible fee to lower your insurance premium.
3. What can increase a car insurance participation fee?
These four factors push up the participation fee for car insurance claims:
- Fair market value - The higher your vehicle is worth, the higher your deductible becomes.
- Owning a bigger vehicle - Vans, SUVs, AUVs, and similar vehicles fall under the commercial vehicle category, which all have higher deductibles than private cars.
- Old age - The older your vehicle is, the higher its depreciation cost.
- Replacement of certain parts - Replacing a battery, tire, ball joint, tie rod, or shock absorber will set you back the highest depreciation fee, with rates of 45% for private cars and 50% for commercial vehicles.
Final Thoughts
Understand how the participation fee for car insurance works, the coverage you want for your car, and how much you can afford. Getting too little coverage and too many deductibles can be impractical, and too many covers are a sure way to ruin your finances.
It helps when you can compare your picks for car insurance providers and the price ranges you have in mind. Also, ask questions to your insurance advisor when you feel the need to, just to get the maximum peace of mind when you’re driving.
Get a Free Car Insurance Quote!
Looking for car insurance? Below is a list of top car insurance companies in the Philippines and their features, including Malayan Insurance, OONA Insurance (formerly MAPFRE), Stronghold Insurance, and SGI Car Insurance
Save money on car insurance by knowing all your options. Compare quickly and easily by getting a free car insurance quote from Moneymax!
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Source: [1] Fair Market Value (FMV): Definition and How to Calculate It (Investopedia, 2022)
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