Third Party Car Insurance In HK | What Is Third Party Liability Insurance?

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moneyhero

Last Updated 04 August, 2022

Which is the cheapest car insurance in 2022? MoneyHero helps you compare car insurances offered by Allianz, Zurich, FWD, AIG, and Ping An. We also explain the 5 key factors that affect the cost of “third party” and “comprehensive car insurance”!

“Third Party Insurance” is a Legal Requirement

The first thing you need to know is purchasing car insurance is mandatory. According to Section 4 of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272), it is illegal for any person to use, or to permit others to use, a motor vehicle on the road without an in-force third party risk insurance. Any violation may lead to a fine of HK$10,000 and 12 months of imprisonment.

What Is Third Party Insurance?

Third Party Insurance, as the name implies, covers the injury, death, and property damage to third parties other than the car owner or the policyholder. It is Third Party Risk Insurance, also known as Third Party Liability Insurance or simply “third party insurance”. Besides “third party insurance,” car owners can choose comprehensive car insurance, also known as “comprehensive insurance”, for broader coverage.

In addition to the coverage of “third party insurance,” “comprehensive insurance” also covers the loss of the owner’s/policyholder’s car due to floods, fire, traffic accidents, theft, and emergency towing services. Some insurers also provide additional protections and support services to the “comprehensive insurance” policyholders, such as “new for old” vehicle replacement within a specific period, “windscreen protection,” and emergency roadside support services, etc. Car owners may select the insurer and insurance plan according to their needs.

Car Insurance Comparison

Insurer Allianz Zurich FWD AIG Ping An

Product Name

Comprehensive Motor Insurance (Private Car)

Motorplus Insurance Plan Comprehensive Insurance

MotorSmart Plus Comprehensive Insurance

AIG Auto Insurance (Comprehensive Plan)

Comprehensive Insurance

NCD Protection

Total amount claimed  not exceeding HK$100,000 within one year can retain the existing NCD

Total amount claimed not exceeding HK$50,000 within one year can retain the existing NCD

Total amount claimed not exceeding HK$50,000 or 15% of the sum insured within one year can retain the existing NCD, whichever is lesser    

Total amount claimed not exceeding HK$50,000 or 15% of the sum insured within one year can retain the existing NCD, whichever is lesser

NCD Rate

20% after holding the policy for 1 year and no claim being made

30% after holding the policy for 1 year and no claim being made

20% after holding the policy for 1 year and no claim being made

20% after holding the policy for 1 year and no claim being made

20% after holding the policy for 1 year and no claim being made

Windscreen Protection

Up to HK$5,000

Up to HK$4,000 (no excess, without deducting NCD)

Up to HK$5,000 (no excess, without deducting NCD)           

Up to HK$4,000

Temporary Substitute Car

HK$1,000 per day (maximum 5 days)

Up to HK$4,000 (Policyholder to bear 20% car rental fee)

Up to HK$5,000 (daily limit of HK$1,000, policyholder to bear 20% of the car rental fee)

Up to HK$500 per day (maximum 7 days)

Free 24-hour Towing Services

Up to HK$2,000

Up to HK$2,000

Up to HK$2,000

New For Old Coverage

Full compensation for vehicles first registered within 1 year

Full compensation for vehicles first registered within 1 year

Full compensation for vehicles first registered within 1 year

Full compensation for vehicles first registered within 1 year

✅ (Only applicable to new cars)

Personal Accident (Named Driver)

Up to HK$250,000

Up to HK$100,000

Up to HK$100,000

Up to HK$200,000

Get Quotes Online, Simple and Secure

When buying a car, many people would appoint a car dealership or agent to handle their car insurance for convenience purposes. However, to clearly understand the protections, it is strongly recommended that car owners/car-owners-to-be compare and select the appropriate car insurance by themselves. MoneyHero offers instant online car insurance quotes. All you need to do is enter your basic information to get instant premium quotes for most car models. It is very simple and convenient!

“Comprehensive” or “Third Party” Insurance?

The premium for “comprehensive insurance” is higher than “third party” insurance, even under the same conditions as “comprehensive insurance” provides broader coverage. For car owners, no matter whether they purchase “comprehensive” or “third party insurance”, it is always the lower the premium, the better. After all, the cost of owning a car in Hong Kong isn’t low at all.

However, insurers need to assess the risks and various factors before determining the premium amount, and each insurer has different standards and focuses. So, what are the factors affecting car insurance premiums? Generally speaking, the factors that impact the premium are the vehicle’s market value and performance, the driver’s driving record, driving experience, age, occupation, claim history, and traffic conviction records.

Factors Affecting Car Insurance Premium

Factor #1: Car Owner’s Driving Experience

Among the various factors affecting the premium, the car owner's/policyholder's age and driving experience are more decisive. You might have heard that many insurers refuse to insure car owners under the age of 25 or with less than 2 years of driving experience. It is not difficult to understand the reasons behind it. Firstly, youths may be less alert to threats and dangers than middle-aged people, and secondly, their lack of driving experience may lead to a higher chance of accidents. Anyway, some insurers are still willing to insure such high-risk clients, but, of course, the premium will inevitably be higher. In the case of “third-party insurance”, it is usually several times more expensive than the premiums for experienced middle-aged drivers. In addition, when making a claim, drivers under the age of 25 or with less than 2 years of driving experience are required to pay an additional excess, also known as deductible. “Excess” refers to the amount a policyholder has to pay out of his/her own pocket before the insurer pays for the rest.

Factor #2: No Claim Discount (NCD)

What is NCD (No Claim Discount)? NCD is a unique feature of car insurance. It is a premium discount offered to policyholders if no claim has been made within 1 year after the policy is in force; the insurer will give the policyholder a specific discount rate when the policy is renewed in the second year. NCD is also known as No Claim Bonus (NCB).

The NCDs offered by general insurers in Hong Kong for private car insurance are as follows^:

NCD for the 1st year: 20%

NCD for the 2nd year: 30%

NCD for the 3rd year: 40%

NCD for the 4th year: 50%

NCD for the 5th year: 60% (Maximum cumulative level)

^The above NCD rates are for reference only. NCD policies may vary among insurers. The first-year NCD for commercial vehicles, such as light goods vehicles, is generally around 10%. The maximum cumulative NCD is only 30%.

This shows that if a car owner has insured his/her car for 5 consecutive years without any claim, he/she can get a 60% discount when renewing the insurance for the 6th year. If a policyholder wishes to change the insurer, the NCD remains valid, but the policyholder must apply for a new policy within 12 months after the end or cancellation of the old policy, and provide valid supporting documents, then the NCD can be effectively “transferred”. Otherwise, the NCD will be recalculated. Another important point is that NCD follows a policyholder rather than a car, so NCD cannot be transferred to a new owner when a car is sold or purchased.

Factor #3: Car Performance Affects “Third Party Insurance”

Other than the above-mentioned factors of car owner’s age, driving experience, and NCD, the market value and performance have a significant impact on the premium of a third party insurance. A better performing car with higher horsepower is more likely to be involved in accidents due to loss of control than ordinary small or family cars.

Factor #4: Market Value Affects “Comprehensive Insurance”

The car’s market value is a decisive factor for “comprehensive insurance”. In most cases, the market value is equal to the sum insured as policyholders who purchase “comprehensive insurance” would hope to receive compensation similar to the car’s market value when the car is declared a “total loss”. Premiums are generally higher for luxury cars with high market values, such as Mercedes Benz S400L and the 7-seater Toyota Alphard.

Factor #5: Car Owner’s Occupation Affects Premium

Car owners/policyholders should note that their occupation, claim history, and traffic conviction records will also affect their car insurance quotes. Someone in the construction industry may be more likely to pay a higher premium than others, even under other similar conditions. Construction industry practitioners generally drive in and out of construction sites, and thus, there is a higher risk of accidents or damage to their vehicles than those who work in the office. Of course, occupation does not affect premium as much as a car’s market value and performance. The final premium depends on the parameters of each insurer. Obviously, insurers would use claim and traffic conviction records as a guide to manage the risk.

Excess has to be Paid even with a Car Insurance

Even with car insurance, policyholders still need to pay in the event of making claims or being claimed. Car insurance policies list the excess amount, which is the sum the policyholder is responsible for when the insurer processes a claim. For example, if a car with “comprehensive insurance” is stolen, a claim of HK$100,000 is made against the insurer. However, as the policy states that theft excess is HK$10,000, the insurer will only pay a maximum of HK$90,000.

In addition to the Young Driver Excess and Inexperienced Driver Excess mentioned in the early part of this article, the common excesses in car insurance policies include Unnamed Driver Excess, Parking Excess, Third Party Property Damage Excess, etc. When choosing a car insurance policy, apart from comparing the premium and coverage, the insured should also pay attention to the amount of excess. Even for the same type of excess, the relevant amount can vary up to 10 times or more under different policy plans. Therefore, it is necessary to read the relevant clauses carefully to avoid a significant budget loss in the event of an accident.

Renew or Purchase a New Insurance Policy? Think Twice!

Purchasing Third Party Car Insurance is a car owner’s legal requirement. In general, insurers will notify their clients of their policy upon the expiry of their policies through letters, emails, text messages, or phone calls. To renew or not, there are still many factors to consider, such as:

    • Is the current coverage still appropriate?
    • If there is a change in needs, shop around and compare plans from different insurers
    • If you have accumulated a relatively high NCD (usually capped at 60%), would it be cheaper to switch to another insurer than to renew your policy?
    • If you have made a claim, renewal might be a more suitable option

Besides paying attention to the policy expiry date, car owners should also consider the premium, coverage, and their own needs before deciding whether to renew or purchase new car insurance.