All Risk or TLO Car Insurance: Which One Should You Choose?

Indonesians are highly aware of potential road risks. This is evident in the wide range of car insurance policies offered in Indonesia. This is understandable, considering the high number of road accidents, especially in large cities like Jakarta.

Those considering purchasing a car insurance policy may be confused by the choice between All Risk and Total Loss Only (TLO) insurance. Therefore, car owners need to understand the difference between them.

Why is Car Insurance Important?

The WHO notes that traffic accidents are the third-leading killer in Indonesia, after coronary heart disease and tuberculosis. According to data from the Indonesian National Police Traffic Corps (Korlantas Polri), there were 103,645 cases in 2021. Human negligence is a major factor in accidents.

It's understandable that this factor stems not only from ourselves but also from others. On the road, the negligence of others can have a devastating impact. Even if someone drives carefully and orderly, they can still fall victim to reckless drivers.

The risk of injury or death can be reduced by improving safety, but the risk of vehicle damage, whether minor or serious, is often unavoidable. This is why our vehicles, in this case cars, need insurance. Furthermore, even the damage is only a scratch, which can be quite expensive.

Accidents aren't the only reason. Mugging and vehicle theft are increasing everywhere. Not only in big cities, but even small, quiet towns are often targets for crime. Consequently, the risk of vehicle theft is also increasing. Therefore, it is very logical if someone decides to insure his car.

What's the Difference Between All-Risk and TLO Car Insurance?

Before deciding which type of car insurance to purchase, it's best to first learn about the two types of car insurance and their advantages and disadvantages:

Total Loss Only (TLO) Car Insurance

Total Loss Only (TLO) literally means "only (if) total loss." This means that an insurance claim can only be filed in the event of a "total loss." In car insurance, a total loss is defined as damage exceeding 75%, or loss due to theft or robbery.

If the damage is less than that, you will not receive compensation. The 75% threshold is used because the car is guaranteed to be unusable. The advantage is that TLO insurance premiums are lower than All-Risk/comprehensive car insurance.

Below is a list of TLO insurance premium rates regulated by OJK Circular Letter Number 6/SEOJK.05/2017.

All Risk Car Insurance/Comprehensive Insurance

All Risk can be translated as "all risks." It is also called comprehensive car insurance. This means the insurance will pay claims for all types of damage, from minor to major damage, to loss.

Unlike TLO, the insurance will pay even the slightest scratch on the car. This comprehensive coverage is what makes All Risk or comprehensive car insurance premiums more expensive than TLO insurance premiums.

Below is a list of All Risk or comprehensive car insurance premiums regulated by OJK Circular Letter Number 6/SEOJK.05/2017.

Can All Risk/Comprehensive Car Insurance and TLO Insurance Policies Be Combined?

No need to worry. You can combine TLO and All Risk coverage. For example, if the car you want to insure has just been released from the showroom, or perhaps you're buying a used car on credit, there's no harm in purchasing an All Risk policy for the first and second years. After that, you can insure the car with a TLO policy for the third year and beyond.

The financial burden compared to the risk of damage is an important consideration. A new car will certainly cost relatively more, even if the damage is only minor. As the car gets older, there's no harm in switching to Total Loss Only.

So, Which One Should You Choose?

The illustration above illustrates how to calculate TLO and All Risk car insurance premiums. It's clear that the cost of All Risk/comprehensive car insurance is much higher than TLO, especially if you want to extend coverage.

If your car is expensive and requires significant costs even for minor damage, it's best to choose All Risk. This type of insurance is also suitable for car rental businesses or driving courses, as the risk of even minor damage is relatively high.

The frequency of car use influences the type of insurance you choose. The more frequently you use it, the greater the chance of an accident. This is especially true if your route is frequently busy. Again, All Risk (comprehensive) car insurance is the best choice.

Conversely, if your car is parked at home more often than you take it out, it's better to choose TLO. Accidents aren't the only determining factor. Crime rates also need to be considered. Crime rates in certain areas are relatively high. If you live or frequently travel in such areas, be sure to insure your car with TLO.

You might think, "I can't be certain I'll have an accident within a year." If you think that and ultimately decide not to insure your car, you should reconsider.

Since no one knows when disaster will strike, prevention is better than cure, right?