An insurance policy will protect the driver from bearing all the financial burden in the event of an accident, in exchange for an annual insurance premium.
Motor insurance is required by law in Malaysia for vehicles before road tax can be purchased. There are generally three categories of insurance policies, Third Party, Third Party with Fire & Theft and Comprehensive coverage. The coverage for the policies can be seen in the following table.
|Cover||Third Party Cover||Third Party, Fire & Theft Cover||Comprehensive Cover|
|Liabilities to third party for:
|Loss / damage to own vehicle due to accidental fire / theft|
|Loss / damage to own vehicle due to accident|
|Liabilities to driver & passengers of own vehicle (passengers, bodily injury, death)|
Third party insurance is the most basic policy, protecting only the third party in an accident, i.e. the driver, passengers as well as the car that you got into an accident with. This covers the repairs to the third party’s car, and injury or death to the persons in that car.
Additional fire and theft cover adds basic protection for your own vehicle. It covers any loss or damage incurred due to theft or an accidental fire.
Comprehensive insurance gives you the best coverage among all three. Apart from covering third party liabilities, thefts and accidental fires of your own car, it also covers all damages to your car in the case of an accident, and the damage/ loss of property in your own car. Injuries, death and other bodily harm caused to you and your passengers are also covered.
Premium rates for these insurance policies are governed by the Bank Negara Malaysia along with the General Insurance Association of Malaysia. These rates change on a yearly basis. Additional cover can be obtained depending on individual specifications, and may cover your car’s wind shield, expensive audio equipment, damage caused by civil unrest and others.
Factors Affecting Premiums
The factors affecting the base premium of car insurance are Location, Total Insured Value of a car (depends on market value) and Cubic Capacity of a car. The pricing of premiums is mostly tariffed by the Bank Negara Malaysia and the General Insurance Association of Malaysia.
- Location The base value will be affected by whether the car is in East or West Malaysia
- Total Insure Value The total value of which you are going to insure your vehicle for. It is acceptable to over insure or under insure your car. Undervaluing your car will result in the insurance company compensating for up to the amount insured. Any additional costs will be considered as self-insured or borne by the owner. Overvaluing your car will result in higher premiums with the insurance company only compensating for the market value for the car.
- Cubic Capacity The size of your engine
Drivers have access to No-Claim Discount if the driver has not claimed from their policy for previous years. This discount rate is regulated by the Bank Negara Malaysia and the General Insurance Association of Malaysia. No-claim discounts can reduce premium amounts by up to 50 percent.
There are factors known as Loading that will increase the premium needed for insurance. These are factors that influence the risk an insurance company has for a car.
- Age of Driver Drivers aged less than 26 and above 69.
- Age of Car Cars above the age of 10.
- Claims Experience Frequency of claims made.
- Reconditioned /Second Hand Vehicles Adjusters will evaluate the condition of reconditioned / second hand cars.
- High-Performance / Sports Vehicles High performance/sports vehicles will incur additional Loading.
- High Risk Theft Vehicle (HRTV) Cars listed in the HRTV list will incur additional Loading.
Optional coverage can be purchased with the car insurance to better protect you. These some of these are included in comprehensive coverage while others are purchased on.
- Windshield Insurance In the event your windshield gets damaged, this cover provides insurance for repairs or replacement without affecting your No-Claim Discount.
- Audio and Accessories Cover In the event your car accessories are damaged, this cover provides insurance for repairs or replacement without affecting your No-Claim Discount.
- Special Perils In the event your car is damaged by acts of nature such as Floods, Landslides, earthquakes, etc, your car is covered.
- Number of Authorized Drivers A premium will be incurred for increased number of drivers in the policy.
- Number of Seats A premium will be charged for cars with more than 5 seats.
- Gas Conversion Kit and Tank This is to cover for Natural Gas Vehicle kit and tanks.
- Legal Liabilities to Passengers Used in the event the passengers from your car sues you for negligence.
- Legal Liabilities of Passengers Used in the event to cover legal liabilities of your passengers for
- Compensation for Assessed Repair Time Compensation for time your car is in the workshop for repairs.
Insurance companies may incur additional Loading from a driver’s history to compensate for the risk borne by them.
Generally major insurance companies only issue policies to cars of less than 15 years of age and of a minimum value of RM10,000. Those exceed these two factors will be considered too high risk to insure. To get car insurance that fits into the two areas, the best way is to go through government linked insurance agents such as MYEG and Pos Malaysia.