This pertains to the admin procedure in case your car is damaged beyond economical repair, stolen or destroyed by fire.
If you insure your car with COE, the insurer will send you a cheque for the market value of your vehicle, plus its remaining COE value.
If you insure your car without COE, the insurer will send you a cheque for the market value of your car only. At the same time, LTA will send you a separate cheque for the remaining COE value.
Insuring with COE is largely a matter of convenience.