Everything about Car Insurance in Malaysia: From Special Perils Coverage to Premiums

Even if you are the most careful driver out there, car accidents can happen unexpectedly – whether it is a small bump, a major collision, or a natural disaster such as flooding. In these instances, car insurance can help you by covering the cost of repairs both to your car and to the third party involved in the accident.

In Malaysia, motor insurance is a necessity and requirement by law when you purchase a vehicle as it’s a way to protect you as a car owner. There are various types of car insurance in Malaysia and you also have the option to get additional protection from the inclusion of special perils coverage to windscreen protection.

The Types of Motor Insurance in Malaysia

A motor vehicle insurance is a policy that protects vehicles such as cars, motorcycles, buses, and lorries from unforeseen risks such as theft, as well as damage from road accidents and special perils like floods. There are various factors to consider when you get motor insurance in Malaysia including your vehicle’s value and age, as well as the road you drive on.

There are three types of motor insurance policies in Malaysia with varying coverage. The three main types are Third-Party Insurance Cover, Third-Party Fire and Theft Insurance Cover, and Comprehensive Insurance Cover.

Third-Party Insurance Coverage

In Malaysia, third-party insurance coverage is the most basic vehicle insurance policy. If you get into an accident with someone, the third party in this coverage refers to the other individual. This coverage policy protects third parties or other individuals from injury or death. It includes damage or loss to a third party’s property as a result of an accident caused by your vehicle. However, third-party insurance offers relatively limited coverage. This policy can only be used for third-party claims and cannot be used to make a claim for damage to your vehicle.

Therefore, this policy is offered at a lower price as compared to other insurance policies. Insurance offered on old cars tends to be third-party insurance, but you can talk with your service provider if you wish to get a comprehensive policy instead. In Malaysia, every motor vehicle must have at least a third-party insurance policy to enable a vehicle to be used on the road. The use of valid insurance can also facilitate road tax renewal and prevent you from being fined.

Third-Party Fire and Theft Insurance Coverage

Third-Party Fire and Theft Insurance Coverage is somewhat similar to the third-party coverage but this policy also includes an additional protection policy that covers vehicle damage due to fire or theft. Just like third-party insurance, this policy protects the driver from third-party claims covering property loss or damage to third-party property, bodily injury, or death caused by your vehicle. Typically, this insurance coverage is more expensive than third-party insurance but cheaper than comprehensive insurance.

Comprehensive Insurance Coverage

Comprehensive insurance coverage is the most complete vehicle insurance policy. It offers the same coverage as third-party, theft, and fire insurance policies with additional coverage on your own vehicle, not limited to theft or fire only. In other words, this type of insurance not only protects the third party (other individuals) but also protects the first party (you).

In Malaysia, new cars purchased through bank loans are required to purchase a comprehensive insurance policy. However, you may not need this comprehensive policy if you own a car at a cheaper value (the estimated cost of repairs is not too large and can be self-financed) or own an old car.

Additional Car Insurance Coverage

Most car insurance policies will offer extra optional coverage such as for special perils or windscreen protection, known as insurance riders. However, you may want to consider the additional coverage based on your lifestyle – for example, if you drive on rough terrains where you may be more susceptible to damages. Here are some additional protections you can consider:

1. Protection for Additional Drivers

If your car is involved in an accident with someone other than you behind the wheel, you will have to pay a RM400 penalty when you submit an insurance claim. This penalty is called an unnamed driver excess. By adding additional drivers to your car insurance policy, you don’t have to pay this penalty if they are involved in an accident while driving your car. Most insurance providers in Malaysia allow you to add the first additional driver’s name for free.

However, for every additional driver after that, you’ll need to pay a RM10 fee which will be added to your insurance premium. The maximum number of drivers covered in a car insurance policy is generally set to five people, so if you were to add four drivers to your policy (other than yourself), you will have to pay an additional RM30 for it.

2. Windscreen Protection

There is a high probability that you know an owner that has had a cracked or broken windscreen, windshield, or window from a stone chip while driving on the road. This additional premium extends the protection to all exterior glass on a vehicle including the front and rear windscreen, side window glasses, sunroof, and even the cost of any tint or security film that you have applied on the glass. The add-on only costs 15 percent of the insured windscreen value but is an excellent addition as it does not affect your NCD when making a claim.

3. Special Perils Insurance Coverage

It’s natural to think your vehicle would be safe from floods and landslides. But with the torrential rain that Malaysia receives, it would be a good idea to get a special perils coverage the next time you renew your motor insurance. A special perils coverage covers damage from floods, landslides, landslips, typhoons, hurricanes, storms, volcanic eruptions, earthquakes, subsidence or sinking of the soil/earth, or other convulsions of nature.

Water damage is not a cheap fix, especially if your vehicle gets fully submerged. If it involves mechanical parts and most of the interior fittings, the repairs could even cost you upwards of RM50,000. The cost of this special perils coverage add-on varies according to insurance providers but it generally only costs around 0.5 percent of the total vehicle premium. So, if the vehicle is insured for RM70,000, this will only set you back by RM350.

4. Coverage on Accessories Fixed to Your Vehicle

Expensive sound systems, high-end rims, and other accessories are not insured by your standard insurance plans. However, you can get them insured with an add-on that will cost 15 percent of the value of your accessories. While it may not seem like much, if you insure these items for RM10,000, the premium will set you back an additional RM1,500. It’s best to check with your insurance provider on what is included in the coverage to make it easier to decide if it is worth adding.

5. Strike, Riot, and Civil Commotion (SRCC) Protection

Strike, riot, and civil commotion rarely occur in Malaysia. So your vehicle should be safe unless it is parked in a high-risk area, in a dark alley, or amidst a planned protest. Despite costing only 0.3 percent of the insured sum, this option is rarely taken by car owners. To be on the safe side, be wary of where you park your car next and stay up to date with the news in case there are planned protests.

6. Legal Liability to and of Passengers

The legal liability to a passenger (LLTP) coverage protects you from legal liabilities suffered by your own passengers. This happens when your vehicle gets involved in an accident through your own fault and your passenger decides to take legal action against you for causing injury to them or their loved ones, or damage to their property. The LLTP usually costs about 25 percent of the premium of a basic third-party insurance policy.
/>On the other hand, the legal liability of a passenger (LLOP) coverage protects you when a third party submits a claim against you for the action of your passengers. For example, this protects you should your passengers have an accident that involves a pedestrian, cyclist, or motorcyclist – such as if they open the car door and accidentally injure a passer-by. Compared to LLTP, LLOP is more affordable at RM7.50 per annum.

Other Things to Know about Car Insurance Policies in Malaysia

Waiver of Betterment

Betterment is a portion of the cost that the policy owner has to pay when the damaged part of the car is replaced with a new original part. The older the vehicle, the higher the betterment rates, with this rate being zero for vehicles below five years old and 40 percent for vehicles above 10 years old. This only applies to a vehicle that is up to 15 years old.

However, you can purchase a waiver of betterment to waive the betterment charges in the case of an accident. Should the third party be fully liable for causing the accident, he or she will not be responsible for the aging and depreciating value of the car. In practice, the non-moving parts of a car such as a car door, bonnet, mudguard, or boot cover, depending on the condition, will be repaired instead of replaced.

Added Services

Certain insurance providers offer extra benefits such as free 24-hour towing and roadside assistance, depending on the policy. Some also have extra servicing office branches for any assistance you may require, such as to check with the offices for claims or any forms you may have to fill out. Another fairly recent added feature provided by insurance companies is a mobile app where you can check your policy details, among other things.

Premiums

Premiums are your payments to the insurance providers. Prior to the motor insurance de-tariffication in July 2017, the cost of an insurance policy is determined by the value and engine capacity of your vehicle. Now that motor insurance in Malaysia is de-tariffed, premiums are calculated based on the risk behavior of the consumers. Factors in this risk-based assessment are the driver’s age, gender, occupation, residence, claim history, and the frequency of car use.

No Claim Discount (NCD)

The NCD is a discount provided when you do not make any insurance claims during a specified period. In Malaysia, the percentage of this increases year-on-year on the condition that no claim has been made. For private cars after the fifth year onwards, the rate is 55 percent. One thing not many people know is that in the event that the accident was caused by another party, you are able to claim your insurance without losing your NCD. Your NCD is only lost if there is someone claiming against you.

Claims

Should you decide to make a claim on your insurance for major damage, the “Own Damage Claim”, and the “No-Fault Own Damage Claim” are two types of claims you can make.

An Own Damage Claim is a claim on your own policy towards the loss or damages sustained by your vehicle in an accident. This claim will forfeit your NCD and reset it to 0 percent. As a standard procedure for making an “Own Damage Claim”, you should:

• Report to the police within 24 hours, as required by law.
• Send your vehicle to an authorized workshop for immediate attention. Certain insurance companies have a list of panel-authorized workshops that will identify the cost and sort out the repairs.
• Collect the claim from your insurance company and sign accordingly.
•  Submit the following documents:
  • Original police report;
  • Repairer’s or workshop’s estimated cost of repairs; and
  • Copies of your insurance policy, vehicle registration card, road tax disc, identity card,  driving license of the vehicle owner and driver (if the driver is different), plus the hire purchase agreement (if applicable).

Same as an Own Damage Claim, a No-Fault Own Damage Claim is also a claim on your own policy. However, it doesn’t forfeit your NCD as it’s applicable when the accident your vehicle is involved in is not your fault. you will need to add on copies of the following documents where applicable:

• A signed declaration letter (for No-fault accident);
• Third party’s police report; and
• Police compound or findings.

Do note that the procedures above depend on your insurance provider.

A Comparison Between Each Coverage

A wide range of car insurance options is offered in the market with various types of additional coverage according to your needs and budget. The price of these insurance depends on the type of policy or insurance company you decide on. However, you may want to consider the following when choosing the right car insurance for you:

• Value-added services such as emergency assistance at no extra charge;
• Vehicle insurance renewal facility online or offline;
• Uncomplicated claims process;
• Accessible and comprehensive panel workshop location; and
• Efficient customer service.

Compensation by the insurer to the policyholder is standard practice after a vehicle theft or loss claim is made. The amount that will be received by the policyholder may adhere to one of three key factors, which are:

• The market value of the vehicle at the time the damage or loss occurred;
• The value agreed in the policy; or
• Any that is priced the lowest.

However, a refund will be given by the insurance company to the policyholder based on the value agreed in the agreement regardless of the current market price or resale price. So, now that you understand car insurance in Malaysia, we hope that you’ll continue to stay safe on the roads and choose your coverage wisely. 

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Keyword: Everything about Car Insurance in Malaysia: From Special Perils Coverage to Premiums