Beginner’s Guide to Car Insurance: 5 Things You Must Know

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Beginner’s Guide to Car Insurance: 5 Things You Must Know

Every car owner in Malaysia needs to get his/her vehicle insured once a year, but that doesn’t mean every car owner in Malaysia fully understands car insurance and its various nitty gritties.

And especially after July 1, 2017, when Bank Negara Malaysia introduced flexible pricing for certain kinds of car insurance, it has become imperative for car owners — both existing and aspiring — to grasp at least its basic contours. Simply because now the car insurance providers will customise their offers after assessing the ‘risk factors’ of an individual and the vehicle.

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Read our beginner’s guide as we explain the fundamentals of car insurance in Malaysia.

1. Different types of car insurance available in Malaysia

There are mainly three types of car insurance available in our country for you to choose from:

Third party cover: This is the most basic car insurance and its mandatory for every car owner in Malaysia to have at least a third party cover in their insurance package. This covers the liabilities of a car owner if he/she has caused damage to another vehicle due to an accident. Coverage would include third party’s car repair costs, medical costs (if any) among others. It’s also the cheapest car insurance and still the most purchased policy in our country.

Third party cover, fire and theft: This provides basic coverage to a car owner’s vehicle like losses incurred due to accidental fire or theft, apart from third-party coverage. Needless to mention, it is more expensive than the basic third party cover.

Comprehensive cover: This gives the most enhanced coverage among the options, and hence is most expensive. This covers third party, third party, fire and theft, plus damage to your vehicle in case of an accident. A comprehensive cover can also be customised as you can get additional coverage included in your policy based on your requirements by paying more.

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2. Factors that determine the premium of a car insurance policy

A number of things determine your car insurance premium, especially in comprehensive coverage policies. Some of them are also identified as ‘risk factors’:

Age of the driver: You’re considered a riskier driver if your age is below 26 years or above 69 years, and hence you need to pay a higher premium.

Age of the vehicle: If your vehicle is more than 10 years old, it’s considered more accident-prone — something that’ll hike the price of your insurance premium.

Location: You’ll pay a higher insurance premium if you own a car in a big city in contrast to a small town.

Type of car: That’s obvious. The price of your car is directly proportional to your car insurance premium. Similarly, cars with very powerful engines are considered riskier and hence incur higher premiums. Interestingly, some popular cars (both moderately-priced and expensive) are considered ‘theft-prone’ and attract higher premiums. Insurance premiums for reconditioned vehicles also tend to be dearer; but cars with anti-theft systems and enhanced braking systems tend to boost your car’s safety, as a result, insurance premiums are lesser for them.

Gender of the driver: Females are generally considered safer drivers than their male counterparts, so their insurance premiums are cheaper.

Claim history of a driver: If a driver has made too many insurance claims in the past, he/she is considered risky behind the steering wheel, and hence the insurance premiums will be on the higher side.

Educational qualification and occupation of the driver: You’re considered a safer driver if you’re highly educated, and hence your insurance premium will be cheaper. Similarly, a normal corporate or government employee is expected to drive around for shorter distances (mainly to office and back) in contrast to a sales executive (who is expected to drive around more). Hence, the former’s insurance premium will be cheaper.

No-Claim Discount (NCD): Not claiming insurance during the insurance coverage term is considered reward-worthy (meaning you’re a safe driver) and hence, insurance providers extend a No-Claim Discount to car owners during renewal. You can get 25% NCD on your insurance premium during first renewal, 30% in second, 38.33% in third, 45% in fourth and up to 55% in your fifth renewal.

Additional drivers: Your car insurance premium will increase if you authorise multiple drivers to drive it.

Related: Why You Need Travel Insurance, and How It Shields Your Trip

3. Common exclusions from a standard car insurance policy

There are a number of things that are not included in a standard car insurance policy. Having said that, some of them can be included in a comprehensive cover policy upon additional payment:

Bodily injury or death of the driver: Car insurance generally do not cover for your health or your life in case of an accident. Medical insurance and life insurance are supposed to do that.

‘Act of nature’: Generally, car insurance do not cover vehicle damage in case of a natural calamity like flood, earthquake, landslide, etc. However, some insurance providers have policies which include coverage for ‘acts of nature’ with an additional premium.

Beginner’s Guide to Car Insurance: 5 Things You Must Know

A vehicle trapped in a flooded road in Tanah Mera, Kelantan, on December 25, 2014. Photographer: Muhd Fuad Abd Rahim

Non-factory fitted accessories: You might not get coverage for non-factory fitted accessories like leather seats, wheel rims, etc. unless otherwise declared. You may also need to buy additional coverage for windshields or audio systems. But an advantage in doing so is that your Non-Claim Discount status remains unaffected even if you claim from your additional coverage of windshield and audio systems.

Legal liabilities to your passengers: You need to buy additional coverage for your liability against claims from your passengers in case of any damage caused to them due to an accident caused by your negligence.

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4. Things to keep in mind while choosing a particular car insurance provider

Coverage for all your needs: Choose an insurance policy that covers all your requirements, even if some of them demand additional payments, like protection from natural calamities, car accessories, liability to passengers, etc.

Other crucial factors: Compare online and put in some research to find out about a car insurance provider’s emergency helplines, towing facilities, ease and speed of claim process, etc. before you sign up for one.

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5. Some of the top car insurance providers in Malaysia

After July 1, 2017, car insurance providers are expanding their coverage and offering competitive pricing to woo customers. Here are some of the top car insurance providers in Malaysia:

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