Saving on Insurance

Jul 28, 2007

MOTOR insurance in Malaysia is severely regulated, so there is actually very little you can do to save on it.

Insurance premiums are calculated based on a general formula that considers only the capacity of the engine, the sum insured and the usage of the vehicle (private or commercial).

All companies use this formula, so there is no savings advantage by choosing one company over another if you go solely on price.

That doesn't mean that there aren't ways to save on your insurance premiums. Here are some ways for you to do so.

No claims discount (NCD)

The easiest and best way to save on insurance is to never actually use it.

Companies reward drivers who do not file claims with a no claims discount upon policy renewal.

This NCD is awarded after the first claim-free year, starting from 25 per cent of the premium and goes up to 55 per cent after five years with a clean record.

Obviously, this allows you the opportunity to enjoy significant savings on your insurance by simply being a safe driver.

What's more, your NCD follows you. This allows you to transfer your savings from a clean driving record to the next car you purchase, which can work out to the thousands if you're buying a more expensive vehicle.

NCD is awarded only for full year policies, so if you are in the habit of buying a six-month coverage, you are throwing away a huge amount of savings.

It is also not affected if you file a claim against another person's policy, such as in an incident where you are judged to be not at fault.

You may also opt for additional coverage such as windscreen and accessories insurance, which does not affect your NCD if you file a claim for these items, though with a premium rate of 15 per cent of insured value, you may want to evaluate if the NCD savings are worth it.

Insured sum

As your premiums are calculated based on your engine capacity and insured sum, you can save on insurance by adjusting your valuation of your vehicle along with its current market value.

Though you may place a high sentimental value on your own car and may value it highly, the insurance companies will not always share your views.

Before renewing your policy, call around to find out what the current market value of your car is and insure for the appropriate amount.

You stand to save several hundred ringgit by dropping the valuation of your car to a more realistic level. This will also avoid acrimonious contentions over the payout in the event of a total loss or theft.

Be careful not to severely underinsure your vehicle, as this may affect your claims amount in the event of collision repair.

Also, you are not allowed to insure your vehicle for a sum that is less than the amount outstanding if the vehicle is still under finance.

Third-party insurance

While a comprehensive policy provides the most coverage, a third- party policy will satisfy all your legal requirements and liability to other road users as needed to legally operate your vehicle on public roads.

It is also significantly cheaper than a comprehensive policy.

When opting for third-party insurance, you are essentially playing the odds.

Generally, you have a one in 10 chance of being involved in an accident or theft whereby you will need to make a claim against your insurance company.

As such, if your comprehensive policy premium exceeds 10 per cent of your insured sum, you may want to consider opting for third- party coverage instead of a comprehensive policy.

This is because at this point, it is possibly more cost effective to repair the vehicle at your own cost or to scrap it completely in the event of an accident as opposed to continuing comprehensive coverage for it.

One note of caution on third-party coverage is that you cannot opt for it if your vehicle is still being financed.

You will also need to weigh your own finances on whether you will be able to pay for repairs on your own should you be involved in an accident.

Excess and loading

Most insurance companies will allocate for excess payments when it comes to older cars or for claims when the vehicle is operated by a non-named driver.

This excess payment will generally be RM400 per claim.

Excess refers to the first portion of the claims amount for which you will be responsible.

For example, if you file a claim for RM2,000 and have an excess of RM400, the insurance company pays out RM1,600 while you will be required to bear RM400.

Some companies will allow for zero excess if you make a claim via an authorised workshop. So make sure that your preferred workshop is on your insurer's panel or to only send your vehicle for repairs at authorised workshops if you want to avoid paying the excess.

Inserers may also opt to load your premiums with additional charges if you are prone to accidents, i.e. you file frequent claims and if you have a blemished traffic record.

Once more, it is in your best interest to maintain a clean driving history to avoid being penalised.

(c) 2007 New Straits Times. Provided by ProQuest Information and Learning. All rights Reserved.

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