In Switzerland, every car or motor vehicle owner must subscribe to an insurance contract to be able to register their car. This obligation to subscribe to Swiss car insurance as soon as you buy your new car is your guarantee not to suffer or to inflict heavy financial losses in the event of an accident.
In this blog post, you will learn everything you need to know about the financials of motor vehicle insurance in Switzerland so you can keep your car, motorbike, scooter, boat or camping car safe and protect your financial security in the event of an accident. To help you to avoid making any mistakes let us start with the amount you must insure your car for.
What is the amount your car should be insured for?
In Switzerland, you should always insure your motor vehicle for its catalog price and add the cost of the options. We clarify this because the catalog price of the vehicle is rarely the price you purchased it for, despite this, opting to insure your car for the catalog price plus options is the way it must be done. Here is why:
1) The total amount of your compensation will never be higher than the amount you insured your car for. That is why if you have not valued your car correctly,you will not receive adequate funds to replace it with a new car in the event of a total loss.
2) If you have mistakenly under insured your car, for example, by 25%, you will only be compensated for the 75% of the total cost of repair by your insurance company if your car gets damaged, as a result of this “under insurance”. We clarify this in more detail below.
What is under insurance and how can you avoid it?
In Switzerland, the insurance companies will calculate the value of your car when they provide you with an offer based on its technical details. As seen above they also add the cost of the options to define the total value of your car. Therefore, if you do not declare the correct value of the options while defining your car’s value, you will be under insured. Let us give you an example to help you to understand.
The catalog price of your car: CHF 15’000
The cost of options: CHF 5’000
The total value your car should be insured for is CHF 20’000.
So, if you fail to declare the cost of options while subscribing to Swiss Car Insurance, you will be paying the annual premium on 15’000, which is a lower amount than you should be as the options are not included. The insurance provider will consider that you are 25% under insured.
Now, if your car gets damaged and the cost of repair turns out to be CHF 4’000, your insurance company will only pay for 75% of the cost of repair, which is CHF 3’000 as you are 25% under insured. So, you will have to pay the remaining 25% or CHF 1’000 out of pocket. If the correct value of the car had been evaluated,you would only have paid an additional CHF 30 or 40 per year for your yearly premium.
To avoid this, make sure you declare the total value of your motor vehicle accurately including the options. In the event of a large claim this will save you thousands.
What is the bonus-malus system?
Each year the bonus-malus system isused to evaluate and adjust the amount of the policyholder’s premium based on their claims history over a 360 day period. This 360 day period is known as the “observation period”. The observation period is never the calendar year, because if it was the insurance company would not have the time to adapt the following years premium. It commonly runs from September to August or October to September.
The insurance companies use the bonus-malus system to evaluate your claims history. To understand how it works, you must understand the effect the no claim bonus and malus have on the annual premium of your car insurance in Switzerland.
● No claim bonus: If you, as a policyholder, do not make a claim during the observation period your yearly premium will be reduced by 5%, and this until it gets to a minimum “bonus level” which is situated between 35 and 60% depending on your age and the insured module. Note that the no-claims bonus applies to each insurance module individually (road-side liability, partial-casco and full casco). Consult the Expat-Experts.ch guide to car insurance in Switzerland for more information on the Swiss car insurance modules.
● Malus: If you, as a policyholder, make a claim for an at-fault accident, you will be penalized by a surcharge or malus of 20%. And just like the no claim bonus, each insurance module is treated separately.
The no-claim bonus and malus work together in Swiss car insurance policies. Together, they are known as the bonus-malus system (BMS).
To avoid your yearly premium from increasing be sure to subscribe to the “bonus protection” extended Swiss car insurance coverage.
If your vehicle is more than 7-years-old, contact Charles, the Expat Experts.ch insurance specialist on +41 78 601 40 90 to determine if the full casco module is financially viable for your vehicle or not.
Expat-Experts.ch also recommends consulting Charles so you can get the best car insurance coverage for your money to keep your financial security uncompromised in the event of an accident.