#WhatIWishIKnew – 8 Common Mistakes People Make When Buying Car Insurance
There are several important factors you need to consider when looking for auto insurance. The process may seem simple, but car owners tend to make these 8 common mistakes when purchasing or renewing their car insurance. Read the article below to find out.
Choosing the right car insurance is as important as buying the right car. The two processes must go hand in hand – the car you choose will influence the type of coverage that you will need and vice versa.
Despite this reality, looking for the right car policy can be a dull, tedious, and even confusing process. For instance, cutting corners by getting minimum coverage may seem like a good strategy if you’re on a tight budget, but you could end up being underinsured instead, and on the hook for much bigger bills in case an emergency arises in the future.
So, knowing how to approach the matter and understanding the red flags comes with great payoffs: you’ll score a good deal, have some peace of mind, and most importantly, save money.
At the end of the day, the goal is to find a policy that suits your needs, has maximum coverage but at a minimum cost. Here are the 8 common mistakes people usually make when it comes to buying car insurance.
1. Not being thorough with your research
Shopping for car insurance is similar to shopping for any other product – it’s a big commitment that will require basic research, dedication and time. So, it’s important to go into it with the proper mindset.
For starters, one of the basic requirements of any purchase is to get the item from a trusted source. Whether you are buying car insurance for the first time, or renewing it online, you must first verify if the insurer is a certified entity. If you need a list of the licensed insurance operators in Malaysia, click here.
For further due diligence, we recommend you flipping through the insurer’s social media profiles to verify their authenticity, get customer reviews, and to understand their brand ethos.
Another best practice when researching for car insurance is to check if there are complaints or enforcement actions against an insurer you’re considering.
Do yourself a service and make sure you are satisfied with the level of research that you’ve done on the insurer before purchasing a motor insurance from them.
Compare, compare and compare before deciding on anything important in life!
2. Not comparing the different insurance plans
We can’t emphasise this point enough, and we’re not just saying this because we’re a comparison website. Exploring and comparing products gives you a more comprehensive view of all the possible options in the market.
Besides just comparing the different quotes for the premiums, it’s also important to compare the different insurance providers as well as factors like claim settlement ratio etc., as you would want a product that gives you the most out of what you’re investing in.
By understanding a claim settlement ratio, for example, you get a better picture of the number of claims settled out of the total number of claims received by the insurance company. From that ratio, you can grasp the reliability of an insurance company when it comes to paying the claims, which will help you down the line at the time of raising a claim.
Though we may seem biased, we truly believe that the best way to compare all your car insurance options is by doing it online. You’ll get a better view of the different policies available, side by side, and you can compare certain factors such as premium, coverage, etc.
If you are looking for car insurance, we recommend you checking out our website.
3. Having too much or not enough coverage
Understandably you would want to keep an eye on your bottom line, but the need to be prudent shouldn’t keep you away from securing the best possible option in the market.
One of the common mistakes that drivers often get themselves into is trading ample coverage for that notorious low price – but it backfires when drivers end up without enough protection.
The key here is to find the right balance between purchasing too much and too little coverage.
For example, if you go with third party coverage, you will be shielded against losses, damages, or deaths caused to other parties. However, you will need to be responsible for your own damages and losses, as the insurer will not provide compensation for your car. So in other words, you are liable for the damages sustained on your car – and these figures can be costly.
Of course, we are not saying that third party is a definite no – instead, what we’re really trying to say is that the coverage that you should go with depends on what you’re looking to protect yourself against.
At the end of the day, it’s really better to be safe than sorry, especially because you’re not the only person at risk – you will also be putting everyone else at risk, too. Ultimately, the main purpose of auto insurance is to have financial backing in case of unfortunate events.
4. Falsifying information in your application
First of all, you shouldn’t be lying in any situation. But in this context, don’t lie to your auto insurance company when getting a quote or making a claim because it will only do you more harm than good.
You might be deemed unqualified for coverage in case of an accident, and insurers could be forced into cancelling your policy. It also puts your ability to get a policy in the future in jeopardy.
Be honest and transparent when it comes to the application process or when making a claim. Disclose all facts such as age of vehicle, claim history, previous accidents, engine modifications, and more. The goal is not to give the insurance company a reason to refuse to pay out any claims.
All in all, just don’t lie because not being transparent or blatantly lying will only make it more difficult for you to defend yourself if you are later sued. In some situations, not being honest with your insurer gives them grounds to deny a claim.
5. Not knowing or understanding what your needs are
Each driver has different needs when it comes to their car policy, and it’s crucial that you know what your needs are before buying one.
If you didn’t already know there are three main types of car insurance in Malaysia: third party, third party, fire, and theft and comprehensive cover. If you need some guidance on how to choose the right car insurance coverage, we recommend you checking out this piece we recently did.
But just in case you’re confused over these wordings, here’s a quick overview of how insurance companies term them:
- First party → you, the driver
- Second party → the insurance company
- Third party → everyone else
|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.|
If you are unsure of what coverage suits your situation best, try comparing the products online or read articles related to car insurance for more insights. If you don’t mind spending slightly more, you could also consult with an insurance agent when shopping for a policy to get a better idea of the types and levels of insurance you need.
Equip yourself with the right knowledge, including knowing the right terminology and facts before making any big purchase!
6. Not gathering the right information
Before agreeing to a car policy, there are three things that you must know: mainly your car’s market price, whether you are over-insure or under-insure, and checking your No Claim Discount (NCD). Below are the top three information you should look for before buying car insurance:
a) You car’s market price
This important piece of information helps your insurer come up with a price for your policy.
Of course, insurers would also consider other factors, such as the current condition of your car, among other factors, before deciding on your total policy price.
The previous first step is crucial because knowing the market value of your car helps you determine whether or not the amount insured is sufficient to cover your losses.
For instance, if you insure your vehicle at an amount lower than its current market value (under-insure), you will only be partially compensated up to the amount you insured your car for. This makes sense given that insurance companies will unlikely want to pay you for more than what you’re investing via their policy.
Similarly, if you insure your vehicle at a higher amount than its current worth (over-insure), the maximum compensation you will receive is the actual market value of the vehicle and not the amount you insured it for. The simple logic behind this is, as the policy owner, you cannot ‘profit’ from a motor insurance claim.
c) Check your No Claim Discount (NCD)
An NCD refers to a discount that you’d get when you renew your car insurance IF you have not made any claims from your insurer.
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.
Beyond encouraging drivers to be more insurance-savvy and practice safe driving, NCD is great because of the amount of money you can save, considering how costly auto insurance can get in Malaysia. Just take a look at the substantial amount of money you can save when you avoid making a claim from your insurer.
Here’s a table on the NCD rates for car insurance in Malaysia:
|5th year onwards||55%|
Overall, knowing these important terminologies like NCD or over-insure or under-insure will help you through the application process and also help you save extra money.
7. Sticking with the same insurer after an extended period
The car insurance space is highly competitive. That’s good news for you because that means there’s more options and it’s possible to reduce costs simply by switching to another carrier.
But in order to successfully pull this off you would need to be more mindful of your bills and constantly be on the lookout for the latest policy offerings. Seek new quotes from time to time or always compare online to see how you can get improved rates.
Though we recommend comparing online, as it’s easier and faster, you could also tee up with your agent to help you get the latest quotes or product updates.
The key here is to not be complacent with one insurer just because it’s easy or because you want to avoid the slight hassle. At the end of the day, you want the plan that makes the most sense, financially, for you.
8. Not considering buying car insurance online
The big pushback against purchasing products or services online is the fear of the unknown or the lack of trust. But in today’s digital world, having that mindset will only be to your disadvantage because you will miss out on other options in the market.
For one, buying car insurance online is more cost-friendly than if you were to buy from an insurance agent, for example, because of the extra fees in the form of commissions. Buying online also gives you more freedom to do your own research and compare the options available, including sourcing for the cheapest option.
Additionally, buying online prevents any obligation to purchase insurance out of pressure especially if it’s based on recommendations of your agent. As agents are tasked to support and aid you throughout the process, you may be more inclined to follow their recommendations and ‘cave in’ to a policy that you may not necessarily be satisfied with. Shopping online prevents you from succumbing to such pressure.
Overall, shopping for car insurance online also helps you choose the best policy because there’s just more coverage options. When applying on our website, for instance, you can easily apply filters to find a policy that suits your needs. And lastly, buying car insurance online makes the whole process smoother as it can be done right from the comfort of your own home, at any time.
Too long, didn’t read? The gist: car insurance is important, so act wisely
Before buying auto insurance, make sure you educate yourself on the ins and outs of car insurance, and take note of these common mistakes.
Don’t get frustrated if you can’t figure it all out in one day because the whole process can be a tedious and long one.
At the end of the day, the best insurance would be one that meets your needs, maximises your coverage at a minimum cost.
We hope you found this article informative and good luck in your car insurance hunt!
By the way, click the image below if you are looking for the latest car insurance promotions and deals.
With several car insurance options to choose in the market, it can be difficult to know which is the best, and buyers may end up making mistakes when buying car insurance. Our #WhatIWishIKnew content series and campaign aims to educate our different segment of readers on what they should be aware of in the process of buying car insurance, as well as other factors to consider. Stay tuned for our next article!