What you should be aware when buying motor insurance

As you are now aware that there generally 3 types of motor insurance available in the Malaysia. That are:
1) Third Party Only
2) Third Party, Fire & Theft
3) Comprehensive Cover

Of the above 3 types of insurance, Comprehensive insurance offers better protection, so ideally you should opt for Comprehensive Cover. You should opt for Third Party, Fire & Theft cover only when no insurance companies is willing to offer comprehensive offer to you mainly due to your vehicle age. For vehicles age exceeding 15 years to 20 years, depending on insurance company underwriting policy, you may not be offer comprehensive cover.

Below are areas you should be aware of when buying a motor insurance:
1) Adequate Coverage
2) Insured under Agreed Value vs Market Value
3) Understanding standard exclusion, so you decide the additional add-on if needed
4) NCD Entitlement
5) Excess
6) Betterment

Adequate Coverage
You need to ensure that the sum insured amount for your vehicle is adequate. If the market value of your vehicle is RM80,000 based on your vehicle model and age, you should insured for RM80,000. The least you should insure is not less than 90% of the market value as anything lesser than that will constitute as Under-Insured. When you under-insured your vehicle, average clause will apply when it comes to settling your claim. To ensure your market value is adequate, you can check at mycarinfo.com.my

Insured under Agreed Value vs Market Value
When you receive a quotation for your vehicle, check if the sum insured is based on Agreed Value or Indemnity Value or sometime refer as Market Value. The key difference between agreed value and market value is that when settling for a total loss/theft claim, under Agreed Value, the insurance company will pay the full amount as Agreed. If you are insuring under market value, the insurance company will pay you based on the market value of your vehicle at the time of loss.

Understanding standard exclusion
A standard motor insurance will not cover certain losses, such as your own death or bodily injury due to a motor accident, your liability against claims from passengers in your vehicle (except for passengers of hired vehicles such as taxis and buses) and loss or damage arising from an act of nature, such as flood, storm and landslide. However, you may pay additional premiums to extend your policy to cover flood, landslide and landslip as well as cover your passengers. It is important to check your policy for the exclusions.

NCD Entitlement
The premium payable may be reduced if you have no-claim-discount (NCD) entitlement. NCD is a ‘reward’ scheme for you if no claim was made on your insurance policy on an annual basis. Different NCD rates are applicable for different classes of vehicles. For a private car, the scale of NCD ranges from 25% to 55% as provided in the policy.

Most policies are subject to an excess clause. An excess is the first amount of a claim for which you will have to pay. Your insurance pays for the amount beyond the excess. The excess clause may apply on repair claims and/or on theft claims. Most insurers may impose excess for high risk/ high performance vehicle.

The basic premise of a motor insurance policy is to put the owner in the same condition as he would have been in before an accident occurs. Betterment will apply, when in the course of repairing an accident-damaged vehicle, a new part is used to replace an old part. Betterment is a portion of the cost that consumers will have to bear when the damaged part of the vehicle is replaced with a brand new original part. As the car will be in a better condition prior to the accident the insurance company will require the car owner to bear the difference in costs. This will be based on a scale of betterment adopted by the insurance industry as shown below:

– Vehicle age < 5 – 0%
– Vehicle age 5 – 15%
– Vehicle age 6 – 20%
– Vehicle age 7 – 25%
– Vehicle age 8 – 30%
– Vehicle age 9 – 35%
– Vehicle age > 10 – 40%

Consumers have the option to purchase new add-on insurance cover such as “waiver of betterment” or request for second-hand spare parts subject to availability to avoid incurring betterment charges.