Car insurance is one of those things you don’t really think too much about until you need to renew your policy. At that point, you start thinking about looking for ways to lower your premiums. For many of us, the reason we buy car insurance is because the government makes it mandatory. If it wasn’t, you can be assured that many more drivers will try to get by without it. But the truth is no one should be driving without proper coverage for the safety of other drivers on the road. So before you go ahead and renew your car insurance when its due, here are five things you need to know.
Market value vs agreed value
This refers to the value of your car for purposes of the sum insured. Basically, the maximum amount that your insurance policy will pay out in the event of a total loss of your vehicle. It breaks down like this:
- Market value: the value of your car if you were to sell it. This amount may decrease each year as your car value depreciates. It also means that your premiums will decrease with time.
- Agreed value: an amount that you and the insurance provider have agreed upon. This is generally a negotiation between you and the provider for an amount that you think the car is worth. You could have an agreed value that is either greater or lesser than the actual market value of your car.
It’s usually easier to get an insurance quote if you go by the market value of your car. However, there are reasons why you may want to settle on an agreed value instead. The first is if your car is worth more to you than just its market value. Maybe it has sentimental value, or maybe you want to hedge against it being lost. In either case, you can always ask your insurance provider for an insured sum that is different from the market value. However, note that the insurer does not have to agree to your proposed amount – and that asking for a higher agreed value will also make your premiums go up.
What is an Excess?
Motor insurance product descriptions often include a notification for Excess. This is the amount that you will have to pay before your insurance covers the rest of the costs. For example: you are in an accident and need RM2000 in repairs. If your excess is RM300, you will need to pay that amount before your insurance covers the remainder RM1700. This excess does not apply to every situation, and you should take note of what it says in your policy. Your insurer is required to tell you when you will pay excess and how much of it applies.
What does your comprehensive coverage not cover?
We are advised to get comprehensive coverage for our motor vehicles to ensure that we are insured against the most common situations. However, it is important for you to understand what your policy does not cover. Windscreens are the biggest exception in insurance policies, and you are expected to ask for it to be added as an option. Other exceptions that you can expect to encounter are:
- Damage from riots, civil unrest, and war.
- Damage from acts of god; like flooding, earthquakes, landslides, and falling trees.
- Bodily harm to passengers and to your own self.
These exceptions can be added to your policy by request, but you can expect to pay extra in premiums if you do. For Malaysians, extra insurance against flood damage is something you should think about if you live, or travel through, flood prone areas.
Does your insurance extend into other countries?
It doesn’t sound like something that would come up very often, but people do drive their cars across the border into neighbouring countries. Thailand, Singapore, and Brunei are popular destinations for a weekend road trip. So, you want to know if you are covered should anything happen while you’re away. Depending on the insurance policy, you should be covered if you drive into one or more of these countries. However, you shouldn’t take it for granted and ensure that you know if you’ll be insured.
Singapore requires all vehicles entering the country to have a valid insurance policy.
What happens if you cancel your car insurance policy?
Your current motor insurance policy may not always be what you need right now. Which is why it’s helpful to shop around for a better offer every now and then. If you do find a better deal, then it’s time to cancel your current policy and jump ship. However, did you know that you may be entitled to a refund when you cancel? Every insurance provider brings it up in their product description, but each has their own stipulations on whether you qualify for a refund if you cancel your policy – how much it will be. More often than not, you may be able to get something back if you have never made an insurance claim. Consider it a bonus for being extra careful with your car, and for finding a better deal.
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