KUALA LUMPUR, March 26 — For first-time car owners, juggling the various financial commitments that come with ownership can be a challenge.
Besides the monthly loan payments, one of the highest costs incurred is motor vehicle insurance, which must be renewed annually, along with your road tax, as mandated under the Road Transport Act.
From third-party to special perils cover, it can all seem overwhelming when dealing with insurers for renewal purposes, as owners consider a suitable policy to ensure adequate protection without being overinsured or underinsured.
However, it must be noted that motor insurance premium is often determined by different types of policy coverage, additional benefits, and the sum insured.
There are many types of motor insurance policies available in Malaysia; here are the three main ones:
Third-party
Arguably the cheapest and most basic policy, this covers policyholders against claims for bodily injuries or deaths caused to other persons, as well as loss or damage to third party property caused by your vehicle.
As the name implies, third-party refers to individuals involved in an accident with your car, where you are at fault.
Under the Road Transport Act, all motor vehicle users must be insured against third-party risks to legally drive on Malaysian public roads.
This policy provides limited coverage as it can only be used for third-party claims. This means that if your vehicle sustains any damage, you will have to bear the repair costs yourself.
Third-party, fire, theft
Similar to the aforementioned policy, this policy provides additional coverage for loss or damage to policyholders’ vehicles due to accidental fire or theft.
However, this policy does not cover repair costs for policyholders’ vehicles, such as those resulting from car accidents.
Comprehensive
The most common and extensive coverage policy, this protects the policyholders’ cars in the event of a car accident, fire or theft; and provides coverage to third parties.
Some comprehensive policies offered by insurers also include round-the-clock roadside or towing assistance for policyholders.
Additional covers and extra benefits
In addition to the three main types of policies, car owners can opt for extensions to their standard coverage in the form of add-ons, which are not mandatory.
Some of these extensions, some of which are self-explanatory, include breakage of windscreens or windows; riot, strike, or civil commotion; flood, storm, earthquakes, and natural disasters (also known as special perils); passenger liability (also known as LLOP and LLP); additional named and unnamed drivers; and personal accident coverage.
In its simplest form, LLOP (Legal Liability of Passengers) protects policyholders from legal liability claimed by a third party for negligence committed by their passengers, while LLP (Legal Liability to Passengers) protects policyholders against legal liabilities arising from injuries or damages sustained by passengers in the insured vehicle during an accident for which the policyholder is at fault.
NCD
As a car owner, chances are you have come across the No-Claim-Discount, commonly referred to as NCD, when renewing your motor insurance annually.
Considered a ‘reward’ scheme offered by insurers, NCD entitles car owners to discounts on their annual premiums if no claims have been made on or against their policy.
For a private car, the NCD ranges from 25 per cent (after the policy’s first year) to 55 per cent at maximum entitlement.
For example, if your car insurance premium is RM1,400 with a 55 per cent NCD, you would only be required to pay RM630, excluding extra coverage, sales tax, and stamp duty.