Car insurance rates may differ from one provider to another, but how do you estimate the cost of your preferred coverage? If you’re searching for auto insurance for your car, it’s important to understand some factors that may affect the premium rate. Read this article to find out!
Before buying car insurance, you’re likely going to ask yourself dozens of questions, and one of the obvious ones would be: how much does car insurance cost?
With so many car insurance options to choose from, it’s crucial to understand why the cost of a product is marketed the way it is. That way, you get to make a more informed decision rather than basing it off hearsay, whims and fancies.
One fact that you’ve got to accept while going through this process is acknowledging that annual insurance premium can be costly. But the price comes with a great tradeoff: a peace of mind knowing that you won’t burn a hole in your pocket for repair costs, in case you damage your car in an unfortunate event.
If you didn’t already know, the price of car insurance depends on many factors, including your gender, age, your track record as a driver, your credit record, where you live and even your job.
You can use readily available calculators online to get a rough estimate of the moolah that you’ll need to pump in to protect your car. But before you can calculate your insurance, you will need to cross these factors off your checklist first:
1. Type of car insurance
The price of your premium will first depend on the type of coverage you choose. In Malaysia, you get to choose from either third party, third party, fire, and theft and comprehensive cover. If you need some extra guide on how to choose the right car insurance coverage, we recommend you checking out this piece we recently did.
Here’s a summary of what they include:
|Third party||Most basic of all. Only covers the third party involved in the car accident. Basically, if you’re at fault, a third-party insurance would cover the cost of damage, death, and/or injury to the other party.|
|Third party, fire, and theft (a.k.a. 2nd party policy)||Everything above, plus coverage to your own vehicle if your car gets caught in fire, or gets stolen.|
|Comprehensive cover (a.k.a. 1st party policy)||Everything above, including fire and theft, plus coverage to your own car if it gets damaged due to an accident.|
2. Your car’s gross market value (sum insured)
Unfortunately folks, unlike property, the value of your car depreciates over time.
We read that as soon as a car drives off the new lot, its value may decline by as much as 10%, and can depreciate by more than 20% after just one year, depending on car brands and models. After five years, your car’s value could be worth about 40% of what you originally paid for it.
Knowing your car’s market value is crucial because it affects the total value of which you are going to insure your vehicle for. By the way, it is acceptable to over insure or under insure your car. The only caveat is if you did the latter, the insurance company may undercompensate you instead. Overvaluing your car, on the flipside, means you would need to bear higher premiums, but still only be compensated for the market value for the car.
All in all, we feel it’s better to insure according to your car’s market value, rather than leaving it underinsured. Financial experts, like the one we recently spoke to, supported this view as well.
To find out your car’s market value, you can either consult the nearest branch of your car’s brand provider, go to an independent car workshop or just do it online.
3. Check your No Claim Discount (NCD)
Set by authorities and followed by insurance providers, the NCD system allows car owners to enjoy discounts over time if they do not claim any damages from their insurance companies each year.
However, you will lose your NCD entitlement if you make a claim when you’re at fault in an accident - meaning the other party will claim against you. But if you’re not at fault, which you get to claim from the other party, then that means your NCD entitlement will not be affected.
NCD is important because it will affect the cost of your car insurance premium over time. For instance, if you’re a solid driver with a good track record, you can save money over time by not making claims from your insurer.
Here’s a table on the NCD rates for car insurance in Malaysia:
|5th year onwards||55%|
4. The type of vehicle and its engine capacity
The type of vehicle you own will influence the price of your premium.
When it comes to cars, for example, certain types cost more to insure like expensive, high-end models as they come with high-class features like carbon fibre, hydrophobic window, auto lane keeping and other specialised materials. These features generally cost a lot more to repair.
Other types of specialised, built-in security features such as anti-lock brakes or anti-theft devices, on the other hand, may or may not qualify you for discounts on your car insurance premium. So be sure to find out with your provider.
That’s not all, as the engine power of your car also determines the car insurance basic premium, too. For a rough idea, ranges of cubic capacity begin from 0-1,400cc to 4,000cc and above.
Car owners also tend to pay more premium than other vehicles because of the higher road accidents associated with them, compared to other vehicles like four-wheel drives, lorries and vans. Oh, and the rate also varies according to location: West and East Malaysia.
Private car schedule of premiums
|Cubic Capacity (cc) Not Exceeding||West Malaysia (RM)||East Malaysia (RM)|
|*Comprehensive (X – Rate for first RM1,000 sum insured)||Third Party||*Comprehensive (Rate for first RM1,000 sum insured)||Third Party|
5. Your premium will depend on your risk profile
Before visiting our website, did you know that the price of your car insurance will also depend on your risk profile?
Basically, risk profiling is the method insurance companies use to calculate how much moolah they are going to charge on your insurance premium. Several parameters are used by insurance companies to assess the risk profile of a customer, including:
a) Age and type of vehicle
Though buying a used car definitely does help save up money than buying a new one, you’re going to be subjected to a higher premium.
Unfortunately, old cars are considered high risk on the road - they have outdated safety features and have higher vehicle failure probability.
In some cases, old cars are not eligible for insurance at all.
For an explanation on the type of car, you may refer to our explanation above.
b) Age and gender of a driver
If you are an inexperienced driver, or are male, and are between the ages of 16 to 20 years, then you may be required to pay a higher car premium because you carry more risk.
Based on figures in the Global Status Report on Road Safety 2018, out of the 7,000 fatalities caused by traffic accidents in 2016, about 87% were males.
Similarly, those between the ages of 16 to 20 years recorded the highest number of deaths followed by those between the ages of 21 to 25 years, according to the Road Safety Plan of Malaysia 2014-2020.
c) A driver's claim record
If you have a reputation of having a bad credit score or bad history on your previous car insurance claims, then your premium is more likely to be higher.
Similarly, if you have a record of road accidents caused by your own mistakes in your claim history, then there’s also a higher chance for your premium to be higher. And fortunately, even if you were the victim in the car accident, there’s still a chance for higher premium because of the risk you recorded.
Generally, insurance companies will look into your driving record to see if you’re a high-risk driver, and more risk equates to a higher premium. Insurance companies will also review every traffic violation, summon, and past accident.
The lesson here? Be careful on the road, so that you can maintain a clean driving record. Don’t disobey traffic rules, drive within the speed limit and, most crucially, don’t use your phone while driving.
d) A driver's occupation
We found out that careers like doctors, salespersons, site engineers and real estate brokers may be charged with higher premium rates simply because they are associated with higher levels of stress and lack of sleep, two factors that can increase the risk of traffic accidents.
Other high-risk jobs, other than the aforementioned, include those that require frequent on-road travelling, meeting clients and attending multiple occasions at different places.
Good news is, even if you are in a high risk field or occupation, you don’t necessarily have to pay a higher premium, if you have other means of transportation like commuting via public transportation, for example.
e) A driver's residential area
Drivers who live in high-crime rate areas are likely to receive slightly higher premium rates than those who live in a secured neighbourhood simply because you are at risk for theft.
But if your house has a locked gate or is an access-controlled residence then you will not necessarily be charged extra to your premium.
City-dwellers are also considered riskier because of the higher frequency of accidents, traffic violations and vandalism in urban states. States like Perlis, Terengganu and Kelantan recorded fewer accidents than the populated states, but the latter two are more prone to natural disasters like flash floods.
Need to calculate your car insurance cost?
For a rough estimation on how to calculate your premium amount, we recommend you try this calculator out!
But do take note that actual premium might differ from the amount shown depending on the insurance provider and other factors.
All in all, we hope you found this article useful!