Is Your Credit Score Good Enough To Get You A Mortgage? Here’s Why It Matters
- By CompareHero.my
- November 5, 2020
Mortgage lenders take your credit score into serious consideration when you apply for a house loan. Therefore, it is important to make sure that you have a good credit score in order to be perceived as a low-risk borrower. But how do you know if your credit score is good enough for a mortgage? Read this article to understand more about how your credit score affects the mortgage rates.
You’ve been eyeing that pretty corner lot house for awhile – you’ve done various house viewings, called many different real estate agents, visited neighbourhood after neighbourhood, and now you’re pretty sold on the idea.
This house basically ticks off every yay on your checklist: it’s close to your office, within your budget, looks amazing … eager and excited, you quickly sealed the deal with your agent who then helped fill in the forms and sent in your loan application to the bank – gotta be quick because it’s crunch time, right?
But bad news awaits you: your application was rejected! That’s when you realise there was still one thing left to do that you didn’t do beforehand: check your credit score. You skipped that part because as the saying goes, “out of sight, out of mind” right? No!
The scenario we just painted above is one that many home buyers have experienced. Whether you are a seasoned home buyer or fresh as a daisy, buying a house is a lengthy process that requires a lot of patience, and the last thing you would want to hear from your bank is news that your loan application got declined due to your poor credit score.
Unfortunately, you may have been in such a situation if you have never checked your credit score, or understand the importance of it. At the end of the day, your credit score is what stands between you and the bank’s decision to approve that loan that you just applied for.
Contents
- So what is a credit score, and what score is considered good enough to get you a mortgage?
- But why does your credit score matter?
- Who calculates your credit score?
- What factors are taken into consideration when calculating your credit score?
- So what is the loan approval rate for mortgages in Malaysia?
- Here are several common reasons housing loan applications get rejected according to BNM
- Are you in need of credit assistance – here’s what you can do:
- Got a bad credit score? Don’t worry, it’s not the end of the world!
- By the way, do you need to check your credit score?
So what is a credit score, and what score is considered good enough to get you a mortgage?
If you didn’t already know, understanding and having a good credit standing goes a long way in life and is the golden ticket to some of the best financial deals: competitive and ideal interest rates, premium credit cards, higher chances of buying a car, speedier loan approvals, and most importantly and very relevant to today’s topic – it helps you get a mortgage.
Think of it as a financial report card, and is one that contains your financial information such as outstanding credit, loans, credit card and loan application history, payment history etc. In short, that piece of report carries a whole summary of all your financial activities throughout your life.
You may want to work on improving your credit score if you fall between 300 and 696. (Image source: CTOS)
So if your loan application got rejected, then it could possibly be due to your poor to low credit score, which usually ranges between 300 to 651 according to CTOS. A bad credit score not only affects your chances of securing a loan, it may also be the reason you get rejected for a new credit card, have to pay higher interest rates, or even be denied a job.
A good CTOS credit score, on the other hand, ranges between 697 and 850, and a higher score increases your chances of getting your loan approved.. People with high credit scores are seen as lower risk, so the more points you score, the higher your chances of being accepted for a mortgage, and securing better rates. So possessing a good score can only do you good and set you on course to secure the best financial deals.
But why does your credit score matter?
Having a good credit score is necessary because banks or other financial institutions can’t simply lend you money without first assessing your financial health.
To assess your financial standing, lenders work out a credit score for you to help them decide if they think you are worth taking a risk on if you will be taking on debt. Essentially, they need assurance that you’ll be a responsible, reliable borrower who is likely to repay the debt on time.
In more technical terms, your credit score represents your creditworthiness and how likely you are to repay debt.
So, to successfully qualify for a mortgage, you will need to at least secure a good credit rating.
Who calculates your credit score?
The three digit number that makes up your score is based on information gathered from The Central Credit Reference Information (CCRIS) and CTOS.
Managed by the Credit Bureau of Bank Negara Malaysia, CCRIS provides credit reports and collects credit-related information on all borrowers of participating financial institutions in Malaysia.
CTOS, on the other hand, is a private company, and one of Malaysia’s leading Credit Reporting Agencies (CRA) under the Credit Reporting Agencies Act 2010. They, too, provide credit reporting and are also widely used by financial institutions to determine an applicant’s creditworthiness aside from CCRIS.
Related: What Is A CTOS & CCRIS Report And What’s Their Difference?
Usually, financial institutions use more than one credit report to determine an applicant’s credit health, and CTOS is known to be widely used in Malaysia.
What factors are taken into consideration when calculating your credit score?
If you got a bad score, then you may be itching to know what went wrong. To find out, you first need to understand that your score is calculated based on credit information from both CCRIS and CTOS’s database. There are five factors to this:
1. Payment History (45%)
This depends on whether you paid your loans on time or have missed payments in the past. So if you want this to be a clean record, remember to pay your bills on time!
2. Amount Owed (20%)
The number of credit facilities and the amount owed to the banks. Owing more will reduce your credit score, so be sure to pay off that debt!
3. Credit History Length (7%)
The amount of time you held a credit facility (for example, credit card, or a loan). This typically goes into how many times you’ve had a credit card or loan.
4. Credit Mix (14%)
The types of loans and credit cards you hold. This could either be secured credit (home, car loans) vs unsecured credit (credit cards, personal loans). It’s good practice to hold different types of debt as this will increase your score.
5. New Credit (14%)
Have you been approved for new credit facilities recently? This gives the banks a benchmark on your creditworthiness.
So what is the loan approval rate for mortgages in Malaysia?
To give you a better idea of your chances of securing a mortgage loan in Malaysia, we gathered some data from Bank Negara Malaysia.
According to data from BNM’s HousingWatch.my index, total housing loan applications stand at RM44.8 billion between January to March 2020.
From that number, banks approved RM32 billion of house financing to about 75,000 borrowers, out of which, 41% of the newly approved housing loans were granted to first-time home buyers.
For context, the average of newly approved housing loans from 2013 to 2019 was 43%. So that’s slightly below the usual average.
The overall housing loan approval rate stood at 72.9% as of the end of March 2020, a slight drop from the 2013-2019 average of 75.5%.
But what factors are affecting these rates? The moderation in approval rate, BNM states, is a reflection of the continued housing unaffordability issue in Malaysia, which arises from the mismatch between supply and demand of houses. For instance, 63% of the newly approved housing loans are for the purchase of houses priced below RM500,000.
All in all the approval rates are moderate in Malaysia, so the best thing you can do is to ensure your credit score doesn’t bring your chances down.
Here are several common reasons housing loan applications get rejected according to BNM
- Borrowers are already highly indebted
- Borrowers have little residual income after taking into account monthly living expenditures and existing financial obligations
- Borrowers have poor credit history
- Insufficient documentation to support ability to repay loan obligation
Are you in need of credit assistance – here’s what you can do:
If you’re stuck on matters related to financing your mortgage, BNM recommends getting advisory assistance via the Rumahku Financial Education programme by Agensi Kaunseling & Pengurusan Kredit (AKPK), who would be able to help potential borrowers understand their financial commitments prior to purchasing a home.
Got a bad credit score? Don’t worry, it’s not the end of the world!
But don’t feel bad if your credit score is bad, here’s a few quick tips on how to improve it.
Psst… if you need a more detailed rundown on what you can do to improve your score, we suggest you read this article we did about improving your credit score.
- Update your personal information
- Get out of debt
- Pay your bills on time
- Check your financial relationships
- Build up your credit history
By the way, do you need to check your credit score?
Well, now you can do so for FREE!
As part of their efforts to help Malaysians better understand their financial positions, CTOS is giving out free MyCTOS Score reports to the first 50,000 Malaysian customers for a limited time (till 31 December 2020).
Terms and Conditions:
- Valid from 27 October 2020 – 31st December 2020 and limited to 50,000 customers.
- Each individual is entitled to ONE (1) free MyCTOS Score report only.
- To redeem your personal MyCTOS Score credit report, you need to sign up for a CTOSID account.
- Existing CTOS customers who have redeemed a complimentary MyCTOS Score report before (either directly via CTOS or via our partners) are NOT eligible for this free score.
- The redemption of complimentary score report using the promo code CTOSCH20 is only available online via CTOS website. Not available on mobile APP. Full terms & conditions, visit CTOS website at www.ctoscredit.com.my
Here’s the step-by-step on how to redeem the free report:
For new users:
- Click here to get to CTOS website or download CTOS mobile app
- Sign up for a CTOS ID
- Once verified, login to your account
- Click on the “Buy latest MyCTOS Score report” button
- Key in the promo code CTOSCH20 at the checkout page
- Instantly view your credit report and score.
For existing users:
- Login to your account here
- Click on the “Buy latest MyCTOS Score report” button
- Key in the promo code CTOSCH20 at the checkout page
- Instantly view your credit report and score.
The CTOS Score is a full credit report with your current CTOS Score and CCRIS details.
What’s in it:
- Everything in MyCTOS Basic Report
- CTOS Score
- CCRIS Records (BNM)
- Access to rewards
Read More
#WhatIWishIKnew – What Happens If You Don’t Pay Your Car Insurance Premium?
- By CompareHero.my
- November 4, 2020
Skipping or delaying your car insurance payment can cause your policy to lapse. Good news is, if you’re not able to make the payment due to financial constraints, you will usually get a grace period depending on the agreement with your provider. We list down the five must-know consequences of not paying your auto insurance premium. Read this article to find out more!
There may come a time in your life where you aren’t able to pay your car insurance premium. Maybe you could no longer afford the premium payments due to being retrenched or other unfortunate events, or you were short of cash due to an emergency. Or maybe, you simply forgot because you were too busy.
Whatever the reason, willingly or otherwise, not paying your car insurance premium is a costly mistake that can have damaging and lasting consequences. We highly advise you to pay your car insurance on time.
Simply put, don’t take your car insurance lightly! Here’s a list of problems that could arise if you don’t pay your car insurance on time:
Contents
1. You cannot renew your road tax
Your car’s road tax and car insurance are designed to work in tandem. So without car insurance, you won’t be able to renew your road tax through the Road Transport Department (JPJ). And without your road tax, you won’t be allowed to drive on Malaysian roads legally. If you get caught driving without a road tax, you will be fined up to RM3,000, according to Section 14(4) of the Road Transport Act (RTA) 1987.
Interestingly, both documents usually expire at the same time, this gives you more reasons to renew it concurrently. The point here is: if you don’t renew or have a valid car insurance, you are not able to renew your car road tax.
To make matters more complicated, if you get summoned by the JPJ, you cannot pay for it at JPJ branches, instead, you will be required to go to court. Apart from JPJ, you can also be summoned by the police if you are found driving with an invalid road tax.
2. Your provider will cancel your policy
Skipping or making late payments could result in your car insurance being canceled, and when that happens, your vehicle may no longer be insured.
Without car insurance, you won’t be protected against the financial impact of car damage or loss caused by an accident or any unfortunate incident. That means you won’t be able to make a claim with the insurance company.
For instance, If your vehicle caused a crash, you’ll have to be liable for car repairs, medical bills, and other expenses out of your pocket, which can cost a lot. The Malaysian Institute of Road Safety Research (MIROS) estimated that road accidents cost Malaysia RM9.21 billion in 2016. The lesson here is simply that you can easily avoid the huge financial burden with car insurance.
On top of not being protected, you also won’t be able to drive your car if the accident caused significant damage to your car, and you can’t afford the repair cost. Worse, the cost would be bigger if the vehicle is used for non-personal use like for work or for your business.
The worst scenario is being fined or jailed for causing an accident that either injured or killed someone or caused damage to their property, and to make matters worse – not having enough money to pay for the damages.
3. Your insurance will lapse
When you don’t renew your car insurance or make late payments, this will cause your insurance to lapse. When you have a lapse in coverage, you will not have coverage for a period of time.
The good news is that your policy will not lapse immediately even if you happen to miss a payment as insurance companies often give policyholders a grace period to pay their premium before it officially lapses.
Typically, the grace period is 30 days from the date your policy expires, though it may vary according to the provider, so be sure to check and confirm that information with your own provider.
If you’re not sure what a grace period is, it’s essentially a period immediately after the deadline for an obligation that may be met without penalty or cancellation. So even if you missed a deadline, you won’t be penalised for making a late payment as long as it’s within the grace period.
For example, if your policy premium payment is due on 2 February, and you have a grace period of five days, you technically won’t be penalised until 8 February. After that period, if you have yet to make your payment, your policy will likely be terminated and coverage will cease.
A lapse can happen due to several circumstances: you forget or don’t renew your car insurance, your car insurance provider cancels your insurance, or the insurance company goes out of business.
If you thought you could save up on cash by skipping or making late payments for your premium, you were gravely mistaken!
If possible, avoid making late payments or skipping it because you might end up paying a higher premium on your next policy.
You will also risk building an unfavourable reputation among lenders if they find out you have a history of skipping or late payments to your insurance provider. The last thing you want is to be labelled as a high-risk client, which is essentially someone who can’t be trusted to make full and timely payments.
5. It could affect your credit score
If you didn’t really already know, your credit score is sort of a big deal. It’s essentially a number between 300-850 which represents your creditworthiness and how likely you are to repay debt. If you needed more deets on the topic of credit score, check out this article we did.
Delaying or skipping your car insurance payments could be bad for your credit score because, that’s the sort of information that would be collected into the Central Credit Reference Information System (CCRIS), a system controlled by Bank Negara Malaysia to generate a credit report, which credit bureaus would later use to compute a credit score.
Related: Ultimate Guide To Credit Scores
Some of the information or financial indicators that would be collected to create this report include your outstanding loans, applications for loan or credit cards, any pending utility bills and insurance premium, and the banking records you have.
Thus, any late or missed payments could negatively impact your credit score. And a poor credit score is bad because it will be difficult for you to get your financing requests approved. This makes it harder for you to get a loan, credit card, home, or another car in the future.
The big lesson: you will not have coverage, and that leaves you susceptible to financial loss
Without car insurance or when your insurance lapses, you will no longer be insured or protected. This leaves you more susceptible to financial loss if you get into an accident when you are uninsured.
Besides having to bear all the costs on your own, you might also be liable for the other party’s car repair costs as well. If the accident involves severe damage or death, the absence of car insurance could turn the situation into a legal case where you will be brought to court.
All in all, there are more significant downsides to not having a valid car insurance, and most troubling is how it can cause a major dent to your finances.
Our final tip for you is to be smart with your plans, and to keep close track of your car insurance and road tax to ensure that it is valid at all times, and renewed before it expires.
Read More
6 Reasons Why The Standard Chartered Smart Credit Card Is A Must For Every Millennial
- By CompareHero.my
- November 3, 2020
The best credit card for Millennials is one that blends well into this generation’s lifestyle, understands their spending habits (aka: digitally-savvy), and offers rewards that are beneficial just for them.
Though Millennials tend to shy away from credit cards more than other generations, this piece of plastic is actually a great tool to get the best bang for your buck – when used correctly and responsibly like paying balances on time, keeping utilisation rate below 30% and most importantly, adhering to the credit limit.
But ultimately, what would help set millennials on course for success when it comes to using credit cards is having a product that is catered to their needs and wants, especially as this generation is known for having very distinctive spending tastes.
Words like “cafe hopping” and “insta shops” are typically synonymous with this group, who are more likely to dine out and would prefer to shop online rather than head to the mall.
Their digital-first centred behavior and lifestyle is well evident by the fact that 67% of them find comfort and familiarity with the idea of managing money via mobile technology, according to a research by IPSOS, who surveyed 3,042 Millennials in Southeast Asia, including 1,019 from Malaysia.
This generation also tends to care more about social and environmental causes.
So what does all of this mean? Well, given all of this, it makes sense for them to prefer a credit card that offers rewards that both fit and aligns with their lifestyle.
And guess what? We did a little research and found exactly that! The hottest and newest credit card in town, the Standard Chartered Smart credit card offers smart solutions for sophisticated Millennials.
Contents
- 1. Get 30% cashback for spending on online e-commerce platforms
- 2. Get 6% cashback on selected digital lifestyle spend
- 3. Dining out? Might as well get rewarded with 30% in cashback
- 4. Get rewarded from your favourite e-wallets
- 5. Easier access to cash!
- 6. It’s Malaysia’s first CarbonNeutral® credit card
But before we flash out the entire deets, we want to emphasise that cash is king, and the Standard Chartered Smart credit card has attractive cashback offers!
Let’s be honest, the best part of a cashback credit card is seeing a credit on your monthly credit card statement or having the actual cash deposited into your bank account!
We just got to admit that cashback credit cards are way popular because they provide tangible, understandable benefits, two reasons that make them stand out against reward, travel and gas credit cards.
By the way, the Standard Chartered Smart credit card has a few irresistible cashback offers bundled together.
Here are six reasons and a detailed look into why the Standard Chartered Smart credit card can help millennials make the most out of their spending and #WinAtLife though its numerous benefits and rewards:
1. Get 30% cashback for spending on online e-commerce platforms
We are a firm believer that if you are going to spend anyway, might as well make the most out of it. With the Standard Chartered Smart credit card, now you can shop online and earn cashback while doing so!
Though online shopping is more popular among Millennials – who may find it easier and more convenient to shop online – it also makes so much more sense in today’s world as the COVID-19 pandemic is still rampant across the country, especially with the rising number of cases reported in malls across the Klang Valley.
Earn up to RM80 in cashback each month for your first six months when you spend at certain online merchants. Check our list below. This campaign is valid until 30 April 2021, and terms and conditions apply!
Merchants: Agoda, Boost, GrabPay, Klook, Lazada, Roaming Man, Shopee, Touch’ N Go eWallet and Zalora
Psst… by the way, you can also enjoy up to 20% off on online shopping when you treat yourself to weekday online shopping deals from your favourite online stores at Lazada, Shopee, Taobao, Watsons and Zalora.
2. Get 6% cashback on selected digital lifestyle spend
Besides online shopping, Millennials are also more likely to spend their time doing activities online, as there’s a growing reliance on smartphones and the Internet.
Today, our Millennials connect in ways not previously possible and they, according to IPSOS, increasingly regard online communication not as a proxy for ‘real’ relationships but as an integral part of modern relationships and self-expression. In fact, in South East Asia, around three quarters of millennials regard ‘social networking as an essential method of communication’.
The growing number of digital entertainment options, on top of social networks, is another move to cater to increasing digital lifestyles.
Acknowledging these needs, the Standard Chartered Smart credit card is helping you make the most out of your time online by offering 6% cashback at selected merchants when you spend a minimum of RM1,000 in retail purchases a month. Note that it’s capped at RM20 each month. Terms and conditions apply.
Merchants: Astro, iQIYI, Joox, Netflix, PlayStation, Spotify, Steam
3. Dining out? Might as well get rewarded with 30% in cashback
This card really has something for everyone – if you’re not a shopaholic but a true foodie, then there’s reason to be excited too, as you can indulge around 30% in dining or food delivery cashback and up to 20% off at participating restaurants.
Make the most out of every penny when you dine out next time!
4. Get rewarded from your favourite e-wallets
E-wallets have been mushrooming in Malaysia over the last few years with new platforms surfacing every now and then.
To date, there are a total of 53 e-wallets in the country, with the industry occupying 19% of Malaysia’s fintech space! Bottom line – e-wallets are becoming an increasingly popular method of payment and spending.
So it’s not an uncommon sight that even the Mak Cik stall near your house could be using e-wallets!
Next time you top-up and spend with either Boost, Fave, Grab, do so with a Standard Chartered Smart credit card to stand a chance to get exclusive offers and rewards.
5. Easier access to cash!
If you are in need of financing or extra cash that comes with a low interest rate, and equipped with a range of repayment periods, then this card might come in handy.
By applying to the Standard Chartered Smart Credit Card, you can get up to RM15,000 in quick cash at 0% interest rate & RM100 cashback with Cheque-On-Call Plus.
On top of that, it comes with zero cash advance fees!
6. It’s Malaysia’s first CarbonNeutral® credit card
Being the first generation to have grown up in a world where climate change is part of the daily conversations and norm, has somewhat driven Millennials to be the population that is arguably the most concerned about environmental sustainability and social issues.
This reality has empowered them to desire sustainability in mainstream culture. Millennials may feel that in order to drive change, they must be actively engaged with the sustainability cause, and it’s these beliefs that shape their unique consumption trends, tastes and preferences.
Well, by supporting the Standard Chartered Smart credit card, you are supporting a sustainable future as it is a CarbonNeutral card. Before the creation of the card, Standard Chartered had calculated and offset all the emissions associated with the physical card production process.
Using a card that comes with sustainable features is a small, yet crucial, step in a bid to support the overarching idea behind the sustainability movement.
Sign up now to get great rewards, including bonus sign-up offers!
All in all, the Standard Chartered Smart credit card is a card that packs a great punch – its cashback rewards are impressive, perhaps second to none, and by leveraging on it, you have a great way to make the most out of your Ringgit.
If you sign up for a card from 1 November to 31 December 2020, you are entitled to either RM200 in cashback or a Mi True Wireless Earbuds when you activate and spend your card.
On top of that, for a limited time only, there will be a hidden surprise on the Standard Chartered Smart credit card website, where you can get an extra RM100 cashback when you sign up online (so that brings your total cashback to RM300!). However, the RM100 cashback bonus is only valid if you sign up by 15 November 2020. To discover clues for the surprise, follow Standard Chartered’s Facebook page. Terms and conditions apply.
Read More
#WhatIWishIKnew – The Ultimate Guide On How To File An Auto Insurance Claim In Malaysia
- By CompareHero.my
- November 2, 2020
If you get involved in an accident that causes damage to your car, there are several important steps you must follow as part of the insurance claim procedure. In this article, we provide a complete guide on how to make a car insurance claim in Malaysia. Read below to find out!
Accidents can happen to anyone, even the most careful among us. But what happens after you get into a car accident? You’ll have to make a claim, and for many, this can be a confusing process.
In fact, it’s this process where consumers often complain a lot about, especially when there are delays in their insurance claims, according to Persatuan Insurans Am Malaysia (PIAM) aka the General Insurance Association of Malaysia.
More often than not, the stumbling blocks in the claim process, PIAM states, are due to insufficient information given on the claim form, lack of supporting documentation or the lack of understanding on what the policies actually cover.
Therefore, knowing what to after an accident would greatly alleviate the anxiety that comes with the incident as well as ensure a speedy claims process.
Here’s a guide on how to make a claim from your car insurance if your car is stolen, involved in an accident, or suffered damages caused by unfortunate events such as a flood.
Contents
- But first – what can you claim?
- Let’s break down the different possible scenarios and how you can approach it:
- Scenario 1: Theft of your vehicle
- Scenario 2: Damage to your vehicle due to road accident
- Scenario 3: Compensation for Assessed Repair Time (CART) (Compensation awarded only to drivers found not responsible for accident)
- Scenario 4: If you are a pedestrian or owner of a non-vehicular property that was involved in an accident
- Scenario 5: Bodily injury or death, but this list is not exhaustive:
- In general, what should you do if your car is involved in an accident?
- You can escalate disputes if you aren’t happy
- What do you need to make a motor claim?
But first – what can you claim?
When making an accident claim in Malaysia, there are generally two types that people often make: Own Damage claim and a Third Party claim.
The types of compensation and your eligibility to apply for a claim will depend on the type of car insurance coverage and the nature of the accident or scenario you get in.
For example, if you opted for extra coverage, then you are eligible to claim for add-ons to your insurance, such as windscreen coverage, damage due to flooding and more.
But across the board, damages which you can claim for are:
Special damages
These are claims for specific expenses like transport, repairs to vehicles, getting another vehicle or medical expenses as a result of the accident. Special damages deal with specific monetary expenses that you have to incur as a result of the accident.
General damages
From what we found, general damages represent the types of damages that can’t easily be assigned a monetary value, such as pain and suffering, loss of consortium and emotional trauma.
In this instance, there is no evidence of loss, be it bills or receipts, of a specific Ringgit amount, but they are still considered losses for which the plaintiff deserves compensation nonetheless.
For instance, if you and/or a passenger in your car was injured in the accident, you may claim compensation for the suffering and pain incurred from injuries sustained. You may do so by claiming from the insurer of the other vehicle that caused the accident.
But, the other vehicle’s insurance will only pay out compensation to you if the other driver is found to be at fault for causing the accident. If you are partially responsible, you and your passenger will receive a partial compensation.
See also: How Does Car Insurance Work in Malaysia?
Let’s break down the different possible scenarios and how you can approach it:
Scenario 1: Theft of your vehicle
Certain circumstances will not make you eligible for a claim such as willingly handing over your car to someone else, resulting in the car being stolen.
For example, if you send your car to the car wash or handed it over to a car jockey and it gets stolen, it will be considered as an act of negligence on your part as the car owner.
| Type of policy | ||
| Comprehensive policy | Third Party, Fire and Theft policy | Third party policy |
| You can make a Theft claim against your own insurer/ takaful operator | You can make a Theft or Fire claim against your own insurer | Not eligible to claim |
Scenario 2: Damage to your vehicle due to road accident
There are two ways to claim for damages if your vehicle was involved in an accident:
1. Claim from your insurance company
When claiming from your insurance company, you will have to claim under Own Damage (OD) Claim or Own Damage Knock for Knock claim. Here’s what you can do:
- Lodge a police report within 24 hours of the accident. If you lodged a report after 24 hours have passed, you can be fined RM300.
- Then, inform your insurance of the accident. After that, make sure to send your car to a panel workshop of the insurance.
- After that, you will have to fill up the claim forms and submit back to your insurer.
- An insurance adjuster will then be appointed to access the damage and cost to fix your car, and then the panel workshop will proceed to work on your car.
It’s important to remember that when you claim from your insurance company, you will lose your No Claim Discount (NCD) entitlement.
You should also check your insurance policy and look at the part where it states “excess.” This is the amount of loss you have to bear before your insurance company will pay for the balance of your claim.
For example, if your car insurance excess is RM200, you will have to pay the first RM200 of any claim you make. You will not be entitled to claim for an accident that results in damages below RM200. Excesses help insurers reduce the number of small claims made.
There are two types of “excess”:
i) ‘Compulsory Excess’ of RM400
You have to bear the cost of RM400 every time you make a claim if, during the accident, your car was driven by a person:
- under 21 years old
- holder of an L driving license
- holder of a P driving licence
- named in your car insurance, but is less than 21 years old, and /or holder of L license, and/or holder of P license
ii) ‘Other Excess’ is an amount applicable at the discretion of the insurance company
2. Claim from the other party’s insurance company
When you claim from the other party’s insurance company in the event of an accident, this is known as third-party claim.
Usually, this is applicable if the accident was the other person’s fault. The steps to claim are as below:
- Make a police report within 24 hours of the accident to enable you to claim from the other party’s insurance company.
- Send your vehicle to the panel workshop of the other party’s insurance company.
- Get a vehicle Independent Licensed Adjuster on your own or through a workshop to help evaluate the total cost of the damage, and the loss of use, also known as Compensation For Assessed Repair Time (CART). This is to get compensation for not having a car over the period your vehicle is under repair.
- You will have to pay for the damage first. Then send these documents to the other party’s insurance company:
- Original copy of the police report made by you
- Police investigation result
- Copy of your NRIC
- Copy of your driver’s license
- Car registration card
- Adjuster report including bill of repair cost for your car (or your damaged property)
- Photo (if any) of the damaged car
| Type of policy | ||
| Comprehensive policy | Third Party, Fire and Theft policy | Third party policy |
| Make a Third Party Property Damage claim (TPPD) against the other person’s insurer/ takaful operator | Make a Third Party Property Damage claim (TPPD) against the other person’s insurer/ takaful operator |
There are pros and cons to both types of claims. If you claim from your own insurance, you will lose the NCD entitlement.
If the situation allows you to claim from the third party’s insurance, and you choose to do so, it can take a long time. This is because it involves a longer process compared to if you were to claim from your own insurance.
On top of that, you may find that the amount offered by the third party’s insurance is inadequate. In that case, you should engage a lawyer.
Your lawyer will ask you to sign a warrant to act. This is a document appointing him or her as your lawyer, to authorise the lawyer to act on your behalf. Your lawyer will:
- Take down a full statement from you and examine all the documents that you have, consider the evidence, and explain to you the types and the quantum of claims that you may be granted.
- Write letters to the police station to get copies of the police reports as well as the sketch map of the accident site.
- If you or your passenger was injured, and you have not obtained the medical reports, the lawyer will write to the hospital for the medical reports.
- Write to the insurance company concerned for the compensation.
- If no adequate compensation can be obtained, the lawyer will file a civil suit for you. But if both sides agree for a settlement, then you don’t have to go to court.
If you cannot reach an agreement with the other party, the accident case will be brought to court. The court will have to decide liability, which means deciding who is responsible for causing the accident. The court will also decide how much the injured person (if any) should receive as compensation. The person who is found to be responsible for the accident will be 100% liable for the compensation.
But there may also be instances when another party is also partly responsible for the accident. In such situations, the court will assess the degree of the responsibility in percentage terms in causing the accident.
All in all, each party that is found to be partially responsible for the accident will then have to pay compensation according to the percentage terms decided by the court.
Scenario 3: Compensation for Assessed Repair Time (CART) (Compensation awarded only to drivers found not responsible for accident)
Accidents can be costly, and unforeseen expenses may arise from it such as paying for alternative modes of transportation when your vehicle is being repaired.
If you were to add CART to your coverage, then you get additional compensation for loss of use of your vehicle based on the estimated repair time as assessed by an appointed loss adjuster (excluding the period the vehicle is laid up in the workshop).
For example, Tom insured his vehicle with a provider and purchased the Compensation for Assessed Repair Time (CART) add-on. He opts for a 14-day plan at RM100 per day. So his total sum insured is RM1,400.
He then gets into an accident, and based on the loss adjuster’s assessment, it would take 3 days to repair his vehicle. Therefore, Tom will be compensated with RM300 for the loss of use of his vehicle.
| Type of policy | ||
| Comprehensive policy | Third Party, Fire and Theft policy | Third party policy |
| ||
Scenario 4: If you are a pedestrian or owner of a non-vehicular property that was involved in an accident
These accidents usually occur when pedestrians attempt to cross highways. Similarly, non-vehicular pedestrian accidents also occur annually due to poor maintenance, sidewalk or parking lot defects, and construction or other debris on walkways.
If you happen to be in such an unfortunate situation, you can make a Third Party Property Damage claim (TPPD) against the other person’s insurer/ takaful operator.
Scenario 5: Bodily injury or death, but this list is not exhaustive:
This involves all claims for injuries or fatalities by the third party(ies) as a result of a motor vehicle accident.
In this scenario, the third party sustains injuries or leaves a dependent(s) due to a deceased third party(ies).
Other instances can also result in a claim:
- Pain, suffering and loss of amenities from injury sustained
- Medical expenses / nursing costs
- Loss of earnings / loss of future earnings / earning capacity.
- Loss of dependency
- Funeral expenses
- Bereavement
If a third party and their passengers are injured or if there are any fatalities due to your own negligence, then they may pursue a Motor Bodily Injury claim against you.
However, if the accident was caused by any other third party vehicle(s), you are required to submit your claim directly against the third party insurer concerned.
In general, what should you do if your car is involved in an accident?
Getting involved in a motor accident can be scary, but try not to panic, and rather follow the following steps as suggested by Bank Negara Malaysia:
- Be calm, polite and courteous. DO NOT admit liability or offer any settlement or payment.
- Jot down as much of the following information. This is necessary for the Accident Notification Form (Form A) when making a claim:
- The personal particulars of the driver(s) involved in the road accident – name(s), IC number(s), address(es), driving licence number(s) and telephone contact(s) (if possible).
- The name of the insurer of the other vehicle(s).
- Make/model and registration number(s) of the other vehicle(s) involved in the road accident.
- Registration number of tow truck(s) (if any).
- Make a simple sketch or diagram of the accident scene. Keep it because you will need it to fill it in your Form A, which will then be used to lodge a police report later on.
- Snap photos and note down the extent of the damage(s) to the vehicles/property involved (if the situation permits).
- Immediately call either your insurer’s roadside assistance service (if provided) or Accident Assist for assistance.
- Accident Assist will ask you some simple questions about the accident, and if necessary, help arrange for a panel tow truck to assist you and to tow your vehicle to the nearest panel workshop.
- Accident Assist will be able to also advise you on the nearest panel workshop which you may go to in order to repair your vehicle.
If you don’t follow step 5, then alternatively, you should also fill in Form A and submit it to either your own insurer and/or Persatuan Insurans Am Malaysia (PIAM) or Malaysian Takaful Association (MTA) within seven days of the date of the road accident.
PIAM and MTA may be contacted at:
Persatuan Insurans Am Malaysia 3rd Floor, Wisma PIAM 150, Jalan Tun Sambanthan 50470 Kuala Lumpur Tel No.: 03-22747395 Fax No.: 03-22745910 Email: piam_sec@piam.org.my
Malaysian Takaful Association 21st, Menara Takaful Malaysia, No. 4, Jalan Sultan Sulaiman, 50000 Kuala Lumpur Tel No.: 03-20318160 Fax No.: 03-20318170 Email: mtasecretariat@malaysiantakaful. com.my
- Make a police report of the road accident. You are required by law to lodge a police report as soon as practicable, and in any case within 24 hours of a road accident or theft of your vehicle.
- Cooperate with the investigator/loss adjuster appointed by the insurer to undertake an independent:
- Assessment of the repairs recommended by the panel workshop.
- Investigation of the theft of your vehicle.
You can escalate disputes if you aren’t happy
If you are not satisfied with the way your claim is being handled and how the issue on hand is not resolved – even after you have written to your insurance company branch manager and to its head office – you can refer your complaint to PIAM Information Centre or Ombudsman for Financial Services here.
What do you need to make a motor claim?
In order to make a claim, you must compile the following documents as soon as possible and submit them to the insurer (refer to the table below) within the stipulated time frame:
Own Damage, No-Fault Own Damage and Theft claims:
- Within 7 days of the date of accident/loss if you are not physically disabled or hospitalized following the event.
- Within 30 days or as soon as practicable if you are physically disabled or hospitalized as a result of the event.
Other claims: – As soon as practicable
However, claimants may subsequently be requested by the insurer to furnish additional documentation
| Documents to be submitted | Type of Claim | |||
| Submit to OWN insurer | Submit to OTHER party’s insurer | |||
| Own Damage and No-Fault Own Damage | Theft claim | Third Party Property Damage (TPPD) claim | Third Party Bodily Injury or Death (TPBID) claim | |
| Claim Form (provided by insurers) | ✔ | ✔ | ||
| Motor Bodily Injury/Death claims cover letter (refer to Letter B) | ✔ | |||
| Original copy of police reports | ||||
| • Made by you directly after accident | ✔ | ✔ | ✔ | ✔ |
| • Police letter informing which party is compounded for road traffic offence | ✔ | ✔ | ✔ | |
| Copy of NRIC of driver | ✔ | ✔ | ✔ | ✔ |
| Copy of driving licence of: | ||||
| • driver | ✔ | ✔ | ||
| • policyholder | ✔ | ✔ | ||
| Vehicle registration card | ✔ | ✔ | ✔ | |
| Bill of repair costs of your own vehicle or property | ✔ | ✔ | ||
| Any document in evidence of your income | ✔ | |||
| Photos of (if possible): | ||||
| • accident scene | ✔ | ✔ | ||
| • damages to vehicle at accident scene | ✔ | ✔ | ||
| • injuries suffered | ✔ | |||
| If injured (TPBI claim): | ||||
| Initial medical report (specialist reports may be submitted later)* | ✔ | |||
| Bill of initial medical treatment received | ✔ | |||
| If death (fatal claim): | ||||
| A copy of death certificate | ✔ | |||
| Bill of funeral expenses | ✔ | |||
| Copy of NRIC of dependents | ✔ | |||
Read More
#WhatIWishIKnew – The Cost Of Getting Car Insurance In Malaysia
- By CompareHero.my
- October 30, 2020
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:
Contents
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:
| Coverage duration | Discount |
| 1st year | 25% |
| 2nd year | 30% |
| 3rd year | 38.3% |
| 4th year | 45% |
| 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 | |
| 1400 | 273.8 | 120.6 | 196.2 | 67.5 |
| 1650 | 305.5 | 135.0 | 220.0 | 75.6 |
| 2200 | 339.1 | 151.2 | 243.9 | 85.2 |
| 3050 | 372.6 | 167.4 | 266.5 | 93.6 |
| 4100 | 404.3 | 181.8 | 290.4 | 101.7 |
| 4250 | 436 | 196.2 | 313.0 | 110.1 |
| 4400 | 469.6 | 212.4 | 336.4 | 118.2 |
| over 4400 | 501.3 | 226.8 | 359.5 | 126.6 |
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!
