Compulsory & Voluntary Auto Insurance: Benefits, Types & Compensation Levels

Car insurance is a contract between the car owner and the insurance company. Accordingly, the insurance company will guarantee to compensate part or all of the damages arising related to your car, such as:

• Traffic accidents: Collision, crashing into fixed objects, vehicle overturning, etc.
• Natural disasters: Floods, storms, lightning strikes,…
• Theft: Theft of all or part of a vehicle,…
• Technical problems: Fire, engine damage, etc.

To ensure safety when participating in traffic, buying auto insurance is not only an obligation but also a smart decision. This article will provide you with 5 important information about Compulsory and voluntary auto insurance in Viet Nam.

Distinguishing between compulsory and voluntary auto insurance

Compulsory car insurance:

• Definition: This is civil liability insurance for motor vehicle owners, required for all vehicles participating in traffic in Vietnam.
• Purpose: To ensure the rights of third parties in case the vehicle causes damage to life, body and property.
• Legal regulations: According to Article 58 of the Road Traffic Law 2008, vehicle owners are required to have this insurance certificate to be allowed to circulate.

According to research by the World Health Organization (WHO, 2023) in the 'Global Status Report on Road Safety' report, countries that apply compulsory civil liability insurance have a 78% higher compensation rate for traffic accident victims than countries that do not apply it.

Voluntary auto insurance:

• Definition: A form of optional insurance that allows vehicle owners to choose to purchase to protect their assets.
• Purpose: To compensate for financial losses arising from an accident involving one's own vehicle.
• Types: Includes physical insurance, accident insurance for drivers and passengers, and cargo liability insurance.

According to the Asian Development Bank (ADB, 2024) report on 'Insurance Markets in Southeast Asia', car owners who participate in voluntary physical insurance are 2.3 times more likely to recover financially after an accident than those who only participate in compulsory insurance.

Benefits of Compulsory & Voluntary Auto Insurance

Compulsory car insurance:

• Compensation for damages: The insurance company will pay the third party in case of an accident. The maximum compensation is 150 million VND/person/accident for bodily injury and 100 million VND/accident for property damage.
• Peace of mind when participating in traffic: Helps car owners feel more secure when participating in traffic, minimizing financial risks when an incident occurs.

Voluntary auto insurance:

• Personal property protection: Helps car owners get compensation for damages caused by unexpected accidents such as collisions, fires or theft. Compensation can be up to 100% of the car's value if it is completely stolen.
• Risk planning: Car owners can choose insurance packages that suit their needs and financial capabilities, thereby minimizing costs arising from unforeseen incidents.

Types of compulsory and voluntary auto insurance

There are many popular types of auto insurance today:

• Compulsory civil liability insurance of motor vehicle owners: The only type required by law.
• Civil liability insurance for goods transported by vehicle: Designed to compensate for goods during transportation.
• Motor Vehicle Physical Damage Insurance: Protects the vehicle owner's assets against risks such as collision or natural disasters.
• Insurance for drivers and passengers: Ensures benefits for people in the vehicle in case of an accident.

Conditions for participating in insurance

There are 2 main conditions when participating in auto insurance, specifically:

• Participants: Individuals or organizations that own or borrow motor vehicles to participate in traffic in Vietnam.
• Number of contracts: Vehicle owners are only allowed to participate in one compulsory insurance contract but can participate in many different types of voluntary insurance.

Compensation level and scope of compensation of insurance types

Civil liability insurance:

Scope of compensation: Damage to body, life and property of third parties caused by motor vehicles.

Specific compensation:

• 150 million VND/person/accident for bodily damage.
• 100 million VND/accident for property damage.

Car physical damage insurance:

• Coverage: Includes collision, overturn, fire, explosion, natural disaster and theft.
• Insurance premium: Usually ranges from 1.4% to 1.7% of the vehicle value depending on the insurance package chosen by the vehicle owner.

Understanding the aspects of auto insurance will help owners make better decisions in choosing the type of insurance that suits their needs. Always update your knowledge to ensure maximum benefits when participating in traffic!

FAQ – Frequently Asked Questions

1. What types of compulsory auto insurance are there?

Compulsory auto insurance Mainly includes civil liability insurance of motor vehicle owners. This is the only type of insurance that all car owners must participate in according to the provisions of Vietnamese law, to protect the rights of third parties in the event of an accident.

2. How much is the mandatory auto insurance premium?

Charges car insurance Mandatory fees vary depending on the type of vehicle. For example, for vehicles with less than 9 seats, the fee usually ranges from 480.000 to 1.200.000 VND/year (excluding VAT), while trucks and passenger cars may have higher fees depending on the load and number of seats.

3. What is the scope of compensation of voluntary insurance?

The scope of compensation of voluntary insurance is very diverse, including:

• Physical damage to the vehicle due to accident, fire, or theft.
• Compensation for driver and passengers in case of accident.
• Compensation for goods transported on the vehicle if there is damage.

4. What are the cases that are not covered by auto insurance?

Some cases that are not covered include:

• Driving without a valid driver's license.
• Damage caused by intentional acts.
• Non-contractual damages not related to the use of the vehicle (such as damage to other property due to an accident).

5. How long does it take to settle an insurance claim?

The time to settle insurance claims usually ranges from 7 to 30 working days from the date of receipt of complete claim documents. However, the specific time may vary depending on each insurance company and the nature of the case. You can refer to the article: Experience buying auto insurance Good, safest recommended by many car owners.