What is car insurance all about?
It’s a necessary form of protection! Car insurance covers damages done to your car or to someone else’s, including a whole host of other incidents. However, how much your insurance company will help cover you is all up to you!
It’s determined by the combination of options you’ve chosen that make up your insurance policy. Despite all the advertisements you’ve seen regarding car insurance, there is no one-size fits-all insurance package, so you’re actually given the flexibility to customise it. Let’s begin.
Step 1: Factors to consider before buying car insurance
Here’s a quick look at the top three factors to keep in mind when shopping around:
- The amount of coverage – In Malaysia, it’s compulsory to at least have a Third Party Coverage (we’ll elaborate more on this later). It’s the cheapest one, but it’s really basic. If you cause damage to another car, your insurance can cover it, and that’s about all. If you feel you’re a high-risk driver or that one day you might get really unlucky, you should opt for a comprehensive plan that includes way more coverage.
- The amount of deductibles – If you’re involved in an accident, the amount that you have to fork out from your own pocket is known as ‘deductibles’. Normally, if you want a lower deductible (i.e. less of your own money used), you will have to pay a higher premium, and vice versa.
- The amount of premium – It isn’t how atas your insurance is, it’s referring to the amount you need to pay to the insurance company to be covered. There’s no point in getting the best coverage in the market with low deductibles if you’re not able to pay for it. Bear in mind that a comprehensive plan can cost you thousands of Ringgit each year!
Step 2: Choosing the company that you’ll be stuck with
Looking for the right coverage is one thing; looking for the right insurer to provide you with the protection you need is another. Before settling into an agreement, here are some factors to consider:
- Company’s reputation – Take time to do quick background checks on different insurance companies. Some of the things to look out for is not just positive feedbacks, but negative feedbacks as well, and find out what problems other people have had with making a claim. Chances are that it may happen to you too.
- Legal accreditation – You should also seriously consider choosing an insurance company that’s government accredited and with a recognised track record. This ensures the companies better adhere to the rules, regulations, policies and guidelines compared to non-accredited companies.
- Financial stability – Plenty of horror stories abound of insurance companies that have gone under, and people find themselves vulnerable overnight. To avoid a situation like this, investigate the financial stability of a company by getting a copy of their current financial statements. You can then gauge whether they’re doing well or otherwise.
- Locality - Before a purchase, make sure to buy from one that’s been licensed to sell car insurance in your state in case of a lawsuit.
- Customer service - Find out whether the insurance company provides good after-sale service when you need help. Read up on reviews whether they respond to customers, how efficiently they solve a problem, and whether they are customer-oriented. You wouldn’t want to be dealing with more unpleasant people right after an accident, would you?
- Full disclosure - Always go for an insurance company that provides you with a full disclosure policy. A good one will make sure you understand all the terms and conditions involved, including any clauses, thus ensuring you know what you’re signing up for.
- Payment of claims - Find out how much the company can afford to pay out when you make a claim, and then decide if it’s worth your hard-earned cash. Choose a company that is direct and does not give you any hassle when it comes to making a claim.
Step 3: Looking for a coverage type that fits your needs
There are three main coverage plans that you can find in the market:
- Third Party Coverage - This coverage is the most basic around and is compulsory for every car owner in Malaysia. It only covers any liability from the other party that is involved in the accident. You will not be able to claim for any damages made to your car, but you can claim for any compensation needed to be made to the person you crashed into.
- Third Party, Fire and Theft – The same as the above, but with a few more extra benefits. This insurance policy provides coverage on any damages incurred from a fire or theft of your vehicle. Will obviously cost you more in premium.
- Comprehensive Coverage – Its name says it all; with a wider protection net, it has all the benefits of the abovementioned plan BUT instead of covering only the other party, this insurance covers your vehicle too!
Step 4: Figuring out how your premium is determined
Did you really think you could get the same package price as your parent? These few factors below will explain why you’re paying more than what you expected:
- Location - Where you live and buy an insurance does affect your price. For example, living in a high-density city area will generally have a higher rate compared to rural areas.
- Age - Younger and inexperienced drivers will automatically have a higher premium rate because insurers will see them as a higher risk. No surprise, considering how a report by the Malaysian Institute of Road Safety Research (MIROS) shows that a large majority of road accidents (roughly 54%) involve people aged 17 to 29. While that report may be outdated (based on data in 2009), it still shows a worrying correlation between age and recklessness.
- Gender - Women are generally classified as safer drivers compared to men, therefore women would normally get to enjoy a lower premium rate.
- Driving record - Always remember to drive safely and avoid breaking the rules. Why? A safe driving history can help you get lower premium rates compared to the reckless people.
- Type of vehicle - Cars that have very powerful engines (i.e. a higher cc) are considered riskier and also cost more to repair. Therefore, to cover the potential high costs involved, insurers will naturally charge a higher rate.
- Type of coverage - The more coverage you want, the more premium you’ll have to pay. Simple as that.
Step 5: What are the common exclusions from a car insurance?
You can’t have your own cake and eat it. So it’s no surprise there are a few things that a standard car insurance policy isn’t going to cover. However, you can opt to pay additional fees to have them included:
- Injury or death to driver - Insurers do not cover any bodily injury or death caused to you in the event of an accident. Normally, your life and/or medical insurance is supposed to cover this.
- Liability claim from passengers - In the event of an accident, if your passenger was hurt and wants to claim anything from you, you’re on your own.
- Damages or stolen items from your car - You might not get coverage for any items in your car if it’s damaged or stolen unless it has been declared in your policy. You may buy additional coverage and it will not affect your No Claim Discount (NCD).
- Damages caused by natural disasters - When your car is caught in a flood (the most common natural disaster Malaysians will face), again you’d be forced to fork out money for repairs.
Better to be safe than sorry!
There’s a saying which goes, “I’d rather have it, and not need it; than to need it, and not have it.” While you may feel like you’re the safest driver on the road, the same cannot be said of the other people you’ll face on a daily basis. Even a basic, well-thought out Third Party Coverage plan will be able to save you from too much heartache.
At the very least, this guide will be able to teach you a few things that are important to take note of, instead of simply signing a piece of paper with confusing legal jargon that costs way too much.