Auto insurance is one of those things that you don’t think too much about until you need to renew your policy. At this point, you start to think about ways to lower your premiums. For many of us, the reason we buy auto insurance is because the government makes it mandatory. If it did not, you can be assured that many other drivers will try to do without it. But the truth is, no one should drive without adequate coverage for the safety of other drivers on the road. So before you renew your auto insurance when it expires, here are five things you need to know.
Market value vs agreed value
This is the value of your car for sum insured purposes. Basically, the maximum amount your insurance policy will pay out in the event of your vehicle being totally lost. It breaks down as follows:
- Market value: the value of your car if you sold it. This amount can decrease each year as the value of your car depreciates. It also means that your premiums will decrease over time.
- Agreed value: an amount agreed to by you and the insurer. This is usually a negotiation between you and the supplier for an amount that you think the car is worth. You could have an agreed value higher or lower than the actual market value of your car.
It’s usually easier to get an insurance quote if you trust the market value of your car. However, there are reasons why you might want to settle for an agreed-upon value instead. The first is whether your car is worth more to you than its market value. Maybe he has sentimental value, or maybe you want to protect yourself against his loss. In either case, you can always ask your insurer for a sum insured that is different from the market value. However, note that the insurer is not obligated to accept the amount you offer – and asking for a higher agreed value will also increase your premiums.
What is an excess?
Auto insurance product descriptions often include a deductible notice. This is the amount you will need to pay before your insurance covers the rest of the costs. For example: you are in an accident and need RM2000 for repair. If your deductible is RM300, you will need to pay this amount before your insurance covers the remainder of RM1700. This deductible does not apply in all situations, and you should take note of what it says in your policy. Your insurer is required to tell you when you will pay the deductible and what amount applies.
What does your comprehensive coverage not cover?
We are advised to obtain full coverage for our motor vehicles to ensure that we are insured against the most common situations. However, it is important that you understand what your policy does not cover. Windshields are the biggest exception in insurance policies, and you’re supposed to ask for it to be added as an option. Other exceptions that you can expect to encounter are:
- Damage caused by riots, civil unrest and war.
- Damage caused by acts of God; like floods, earthquakes, landslides and falling trees.
- Personal injury to passengers and yourself.
These exceptions can be added to your policy on demand, but you can expect to pay additional premiums if you do. For Malaysians, additional flood damage insurance is something you should think about if you live in or pass through areas prone to flooding.
Does your insurance extend to other countries?
It doesn’t sound like something that would happen very often, but people drive their cars across the border in neighboring countries. Thailand, Singapore and Brunei are popular destinations for a weekend drive. So you want to know if you are covered should something happen while you are away. Depending on the insurance policy, you should be covered if you drive in one or more of these countries. However, you shouldn’t take it for granted and make sure you know if you will be insured.
Singapore requires that all vehicles entering the country have a valid insurance policy.
What happens if you cancel your auto insurance policy?
Your current auto insurance policy may not always be what you need right now. This is why it pays to look for a better deal every now and then. If you find a better deal, it’s time to cancel your current policy and get off the ship. However, did you know that you may be entitled to a refund when you cancel? Each insurer mentions this in their product description, but each has their own stipulations as to whether you’re eligible for a refund if you cancel your policy – how much will it be. More often than not, you might be able to get something back if you’ve never made an insurance claim. See this as a bonus for being extra careful with your car and finding a better deal.
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