Sembang Santai Takaful: Fahami Motor Takaful Anda
July 10, 2024
Guide to essential motor services by your insurer/takaful operator
July 18, 20248 factors that influence the
cost of motor insurance premium/takaful contribution
For most Malaysians, owning a vehicle goes beyond convenience. It’s a lifeline for daily commutes and weekend adventures with loved ones. But this accessibility comes with responsibility, including proper motor insurance or takaful coverage.
But have you ever wondered why car insurance premiums or takaful contributions vary between drivers? Read on to better understand some of the key factors used to calculate the perceived risk as a driver and the potential cost of covering your vehicle. Understanding these factors empowers you to find the right coverage at a competitive rate.
Factors influencing your premium/contribution
1
Your vehicle
The type of vehicle you drive plays a role in determining your motor insurance premium or takaful contribution. For example, commercial vehicles used for transporting good or people, require commercial motor insurance policy or takaful certificate due to their higher risk profile.
They often have larger engines, clock more mileage, and are exposed to more risks like accidents, breakdowns and more on the road compared to personal vehicles. Consequently, commercial insurance premiums or takaful contributions tend to be higher. Other factors include the likelihood of theft, the cost of repair, its engine and overall safety record of the car.
Did you know?
You are advised to maintain your car in a reasonably efficient and roadworthy condition. You must get your insurer’s/takaful operator’s consent if you make any modification that will enhance or in any way affect the performance of your car. Failure to inform could result in your claim not being payable.
2
Driver's age and experience
Insurers and takaful operators consider your age and length of driving experience when calculating premiums/contributions. Teen drivers or young drivers aged below 25 may face slightly higher rates due to a perceived higher risk as inexperienced or first-time drivers on the road.
Did you know?
Insurance and takaful do not just cover damage to your own vehicle. Getting the right coverage can also protect other road users against accidents that are caused by you.
3
Car market value
Typically, cars with higher market value will have a higher sum insured and therefore a higher premium or contribution. For instance, a Mercedes Benz A-class sedan with a market value of RM241,888 will have a higher insurance premium or takaful contribution than a Honda Jazz 1.5L E with a market value of RM78,161.
During the time of renewal of your car insurance or takaful, you can choose to insure or cover your car based on the market value in that point of time. The benefit is that you are likely to pay a cheaper rate annually. However, if you file a total loss or theft claim, you might get a lesser payout that the sum insured, as your car’s value would have depreciated when the claim is made.
Under the agreed value agreement, the sum insured offered is pre-calculated based on your car’s model, year, and several other factors at point of purchase. If you file a total loss or theft claim, the insurer/takaful operator will compensate you in full according to the sum insured you picked, regardless of the current market value.
Did you know?
You can have an Agreed Value policy/certificate, where your car is insured based on an amount that the insurer/takaful operator and you have agreed on. Under the Agreed Value agreement, the sum insured amount offered to you is pre-calculated based on your car’s model, year, and several other factors at the point of purchase.
If you file a total loss or theft claim, the insurer/takaful operator will compensate you in full according to the sum insured, regardless of the current market value/depreciation.
4
No-Claim Discount (NCD): Build it for more savings
Maintaining a clean driving record and avoiding making motor insurance or takaful claims can significantly benefit your wallet. NCD is often seen as a ‘reward’ scheme for motorists who do not make any insurance or takaful claims annually.
A motorist will lose his/her NCD if the other party files a claim against him/her, or the insured claims for vehicle repair damage himself/herself. However, if the motorist is not at fault and claims from the other party, then the NCD entitlement will not be affected.
This discount can be substantial, reducing your premium/contribution by up to 55% over time!
5
Choose the motor insurance/takaful that’s right for you
Essentially, there are three main types of motor insurance/takaful in Malaysia. We’ve a summary of each type of motor insurance/takaful right here:
Third Party Cover
- Third party bodily injury and death
- Third party property loss or damage
Third Party, Fire & Theft Cover
- Third party bodily injury and death
- Third party property loss or damage
- Loss or damage to your own vehicle due to accidental fire or theft
Comprehensive Car Insurance/Takaful Cover
- Widest coverage
- Third party bodily injury
and death - Third party property loss
or damage - Loss or damage to your
own vehicle due to accidental fire, theft or an accident.
When reviewing motor insurance or takaful, try to strike a balance between the coverage you need and your budget. If you choose a comprehensive cover, your premium/contribution will be higher. However, you’ll have more protection.
You can also explore add-on covers like special perils that cover damages or losses caused by natural disasters or other particular perils not covered by standard motor insurance policies or takaful certificates, such as floods, landslide, earthquakes, and other convulsions of nature.
Did you know?
It’s always recommended to compare quotes from different insurers or takaful operators to get the best deal and ensure you’re getting optimal coverage at a competitive price.
6
Location, location, location: Geographic assessment
Where you reside plays a role in determining your insurance premium/takaful contribution. If you live in an urban area that has higher traffic volumes, crime rates and theft, it could result in higher premiums/takaful contributions compared to a rural area with a lower population.
Insurers and takaful operators factor in the likelihood of accidents and vehicle theft when assessing insurance premium/takaful contribution, tailoring rates to suit the risk profile of each location.
7
Engine type and capacity: More vroom power, higher cost
Insurers and takaful operators also look at engine type and capacity. For instance, if your engine
runs on diesel, then it’s possible the insurance/takaful amount is compared to a vehicle that runs on petrol. The engine capacity refers to a total power produced by the engine of a total vehicle. The CC of your vehicle is directly proportional to the insurance/takaful amount. Hence, a higher CC vehicle may amount to a higher insurance premium/takaful contribution.
8
Your driving record
Picture this: you’re a safe, conscientious driver, adhering to every traffic rule. Your reward? A lower insurance premium/takaful contribution. Insurers/takaful operators consider traffic violations, accidents, licence suspension, and driving experience when evaluating.
Motorists with a history that’s peppered with accidents and traffic violations are often presented with a higher motor insurance premium/takaful contribution because of the higher possibility of accidents.
To improve your driving record, do follow traffic rules, attend defensive driving courses, install safety features, and maintain road safety.
Taking control of your premium/contribution!
While the cost of insurance premium/takaful contribution can be expensive, just like any other consumer purchase, you can potentially lower your insurance premium or takaful contribution while ensuring that you have adequate coverage.
Shop around and compare quotes
Get quotes from multiple insurers or takaful operators to find the best rates for your needs.
Ask for discounts
Many insurers or takaful operators may offer discounts for things like low mileage, safe driving habits and bundling your car insurance/takaful with other policies/ certificates like home insurance/takaful.
Increase your deductibles
A deductible is the amount you pay out of pocket before your insurance/takaful coverage kicks in. Increasing your deductible can lower your premium/ contribution, but make sure you can afford to pay the deductible amount in case of an accident.
Maintain a clean driving record
Avoid traffic violations and accidents to keep your driving record clean and qualify for NCD.
By understanding these factors and taking steps to manage them, you can make informed decisions about your car insurance and takaful protection and potentially save money while ensuring you have adequate coverage.
Talk to your insurance/takaful representative or contact your insurer/takaful operator directly on your options today.
Disclaimer: The information is provided for general information only. PIAM and MTA make no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.