Time for a change: is it worth updating car insurance benefits mid-policy?

Many people will consistently own a vehicle for the rest of their lives after they purchase their first one. It may not always be the same car but once you’re a car owner, it can be very difficult to go back to not owning one. When your life changes, however, it can sometimes impact your car ownership needs, values, and purposes, and some of those can affect your car insurance. Here are some of the common changes people might experience as a car owner:

• Upgrading or downgrading your vehicle.
• The need to add or remove a driver from your policy due to marriage, divorce, or teaching children as learner drivers.
• Changing your benefit limits to match changes in your circumstances.
• Changing what you use your vehicle for.
• Updating your address.
• Adding or removing modifications to your vehicle.

These are common around the world, but people may not realize which of these can affect your car insurance policy.

In Hong Kong, not all of the above reasons require insurer notification. Some will also make less sense in the context of the country’s own car ownership laws and regulations. Here’s what you need to know about how your Hong Kong car insurance is affected when your situation changes:

Upgrading or downgrading your vehicle

Perhaps you’ve had a massive financial windfall, you’ve secured that bonus and promotion at work, and you’re looking to splash out on a nicer vehicle? Or you’ve recently had children and you’re making the decision to trade-in that speedy sports car for a more family-orientated vehicle? Changing your vehicle doesn’t necessarily mean you have to get a new car insurance policy.

You do have to tell your insurance company about the change, and there’s no guarantee that they’ll be able to continue the policy you currently have. However, if they can - upgrading your vehicle to something more powerful and valuable will mean an increase in your premium, and a downgrade may entitle you to a refund. Where the risks and car insurance benefits needed are wildly different - such as swapping a Nissan Cube for a Porsche 911 - your insurer may require you to buy a completely new policy instead.

Adding or removing a driver

If you’ve recently married, it can be a good idea to name your spouse on your car insurance policy. When you have children learning to drive, adding them to your coverage is also a sound decision. Having additional drivers can affect your insurance premium, and will depend on the experience and driving history of the new driver. More inexperienced ones are likely to increase your insurance costs.

Removing a driver, due to a separation or because they’ve purchased their own vehicle and policy, is also an important note to inform your insurer of. There may be a reduction in the insurance premium you pay when you remove additional drivers, so it can be beneficial to let them know right away.

Increasing or decreasing benefit limits

The laws of Hong Kong require that the minimum benefits an insurance policy must have, in order for it’s policyholder to legally operate a vehicle, is third party coverage of HKD 100,000,000 for any one event resulting in death or bodily injury. Most policies also cover third party property damage up to HKD 2,000,000 as a standard benefit as well. For some drivers, they may be looking for more coverage than the minimum.

For the most part, comprehensive policies offer the best benefits and limits of any car insurance plan in Hong Kong. Limits will also be related to the type of vehicle you own as well as your driving history. If you feel like your limits do not adequately reflect your situation, you can always discuss this with your insurer - however, it’s not very likely that changes will be made mid-policy. As most plans sold are 1-2 year contracts, insurers may prefer to discuss changes in car insurance benefits when it comes time to renew your policy.

Change what you use your vehicle for

The simple example of this is where you wish to start using your private vehicle for commercial, for-profit purposes. This may be where you own a van for private transport, and then decide to also work part time as a self-employed furniture removal vehicle for hire. Unfortunately, this constitutes a significant change for insurers, and will often require you to change to a new commercial car insurance policy instead.

Change of address

Unlike some insurance products, or car insurance processes in other countries, Hong Kong insurers do not require notification of a change of address by the policyholder.

Making vehicle modifications

Modifying cars in Hong Kong is tricky subject as the country has some extremely strict laws and regulations around what mods are deemed to be legal or illegal. Section 53 of the Road Traffic Ordinance requires that no changes be made to a vehicle that may cause it to be in breach of other road ordinances. Our own consultants say that even small changes, such as adding an exhaust tip bigger than the factory part, will be in breach of the law.

As such, notifying insurers of modifications is an extremely rare situation as most car owners choose not to make changes to their vehicles. While there are still many that do, the modifications are often illegal and not disclosed. Being involved in an accident with an illegally modified car can see you lose coverage, so it’s advisable not to add mods to your car - or contact your insurer if you have legal clearance to make additions. This may affect your insurance premium.

Perhaps you’re dissatisfied with your current insurer, or you’ve seen or heard an advertisement for another provider that’s offering an attractive discount or better car insurance benefits? Changing insurers mid-policy is easy, however it can often not be in your best interests financially once you’ve worked out what it might cost you.

The impact on your wallet when terminating a car insurance policy will vary by insurer, however most will offer a refund on your premium that’s calculated by the time you have left on your plan. Those making a change of insurer with, say, one month left on their policy, may be refunded 80% of the monthly premium rate as per the company’s refund policy. Those terminating with ten months left may find that refund reduced to as little as 20-30%.

Another thing to be aware of is that most No Claims Discounts (NCDs) are viewed on an annual basis. While they are transferable in many cases between insurers and policies, many will only count completed full-year contracts as being eligible for further discounts. This means that changing insurers six months into a one year policy will negate the six months you’ve just had with no claims, and the count for the NDC will start again with your new insurer.

Due to the short timeframes for most car insurance policies in Hong Kong, we would generally advise that clients keep their current insurance plans unless there is a strong service reason for change, or the financial benefits really do work out in your favor.

Our consultants have stated that 95% of all car insurance plans in Hong Kong run for a one-year term. Most of the remaining plans are two-year policies - it’s really rare for a motor insurance plan to be longer than that in this country. As a year can fly by really quickly, making preference changes to your car plan would normally be best done during renewal times.

Things like adding or removing drivers from your policy, replacing your vehicle, or changing what your vehicle is used for are the exception, and insurers may need to know about these details as soon as practicable. When it comes to knowing what you do and don’t need to tell your insurers, having expert advice from an experienced broker can help.

Kwiksure have been serving the needs of Hong Kong drivers for almost 20 years, and know the ins and outs of car insurance benefits, policy details, and the vehicle insurance market better than anyone else. If you’re looking for the best policy support around for your driving experience, look no further than the leading advisors at Kwiksure today! See our online quotation tool to find out what insurance might cost you, or call our team to find out more.