The Myth: As all motorbike drivers are required to buy motorbike insurance, does the insurance actually protect you?

According to Regulation No.126/2008/TT-BTC from the Ministry of Finance, all motorbike drivers are required to purchase civil liability insurance for their motorbikes. The mandatory civil liability insurance is priced at VND66,000 (inclusive of VAT) and is valid for one year. This is, however, not to safeguard the motorbike owners themselves but rather to indemnify the third party in case of accidents. It works like this: suppose you crash into someone, break their leg and/or damage their vehicle. The insurance company will then, on your behalf, pay the other party’s medical expense of up to VND50 million and the vehicle damage of up to VND40 million. In short, the civil liability insurance makes sure that other motorbike drivers/ pedestrians are protected from your potential inability of paying compensation should accidents take place.

The civil liability motorbike insurance is widely referred to as “motorbike insurance” and this is what traffic cops stop you for to check. They will ask to present proof of purchase of the ‘motorbike insurance.’ If you fail to do so or present an expired one, then you will be fined VND100,000. Remember to renew it every year to avoid being fined because the fine costs more than the insurance itself.

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Apparently in order to claim the civil liability insurance, you – as the insured party – have to present the police report and any medical reports of the other party. But insurance companies will only indemnify to a certain pre-determined fee for each case. Each insurer has a standard compensation percentage for every case and with this practice you as the insured party need to fork out from your own pocket to pay the balance of the formal fee (billed medical fee, repair fee, etc.) for the other party. As with most accidents in Vietnam, the injured parties almost always want to be compensated more than the formal fee, sometimes to an unreasonable extent, claiming ‘trauma.’ For this, no type of insurance can protect you and it is now up to your negotiation skills to work out an agreement.

Last year, according to a report by the Vietnam Insurance Association, 39 percent of indemnified cases were successful – amounting to about only one-third of all claims that were filed. The report also mentions that for the first time in recent years, the 2012 revenue for civil liability
insurance dropped dramatically and this shows the “awareness” of the people about what this type of insurance really does for them – only as a shield from traffic fines.

In essence, the civil liability insurance doesn’t protect you at all. You need to purchase an optional vehicle and passenger insurance which costs you a lot more than VND66,000. This optional insurance is priced at different levels depending on the chosen level of indemnity. You can
purchase this at any insurance company and my advice is to choose the larger, more well-known insurers so that they have sufficient financial ability to cover you.