There is no road tax as such in Panama. Those who register a car do so when they buy it and the fees they pay then are considered to be a tax. This is known as a circulation tax and will vary depending upon the type of car you have and its value and the area in which you are living. For example, from January 2011, if you are driving a car in Panama City that is worth less than $20,000, your circulation tax would be $28. The rates are reviewed regularly and as every office charges different amounts you would need to contact them prior to registering your ownership of the car to find out the exact amount you would need to take with you.

Additional taxes are payable in the form of tolls on some roads. These are normally on the highways and on some of the islands. On the San Blas islands for example, there is a ‘tax’ of $6 to use the roads, but tolls on the highways will vary depending upon the region that you are in.

It is now compulsory for all cars and other vehicles in Panama to have liability insurance although cover for collision damage can only be applied to newer vehicles. The way the premium is calculated is based on the age of the driver, the type of the car and the driver’s record. The insurance company will also take into account what the vehicle is used for. Obtaining car insurance for Panama is easy as you normally have the help of the insurance agent to complete the paperwork.

When you first buy your car the dealer may try to sell you insurance and you can take this option or find your own insurer. You only need to have the vehicle registration documentation in order to obtain insurance.

If you car was made during or after the year 2000 you can obtain full cover on the insurance. This includes personal injuries, damage to other property, medical help and cover for the vehicle. Those which are older than this are covered only for damage to the property of the third party, but you can have medical cover for any passengers in your car added to the policy if you require. As the car gets older the cost of full cover rises considerably as it is considered that the car is more likely to be in an accident and replacement parts are not only more expensive but harder to find.

As with car insurance cover in the US and the UK you are also able to adjust the cost of your premium by opting for different levels of excess, so the higher the amount you are prepared to pay in the event of an accident before your insurance needs to cover the rest the lower your premium will be.

You will also find that your cover sets limits which can be changed if you prefer. Most insurance companies will recommend that you have limits of a minimum of $10,000 per person with a minimum limit of $20,000 per accident. For property damage the minimum limit should be $15,000 per accident and the minimum recommended for medical expenses is $5,000 per person and $25,000 as a total for the accident. You can have higher limits if you prefer but this will increase the cost of your premium.

It is generally recommended that you have the highest limits that you can afford. If you are involved in an accident and a third party makes a claim against you, it could be that the case goes to court. This can take a long time to resolve and you could find that if you have opted for very low limits that you are liable to pay thousands of dollars when the case is finally resolved.

When you are looking to purchase car insurance in Panama you will also find that the insurance companies offer a number of extras as they do in the UK and the US, such as breakdown cover and legal advice, and it is worth having these added on to your policy as they can save money and you will not need to purchase these separately.