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Motor insurance

Motor insurance

This is an introductory post to provide you with a better understanding of what motor insurance is and what you must know when buying motor insurance policies and making claims.

Types of motor policies

When you buy a motor vehicle, you need to buy a motor insurance. There are, however, many types of motor insurance policies available. The common types are:

• Third party cover - This policy insures you against claims for bodily injuries or deaths caused to other persons (known as the third party), as well as loss or damage to third party property caused by your vehicle.

• Third party, fire and theft cover - This policy provides insurance against claims for third party bodily injury and death, third party property loss or damage, and loss or damage to your own vehicle due to accidental fire or theft.

• Comprehensive cover - This policy provides the widest coverage, i.e. third party bodily injury and death, third party property loss or damage and loss or damage to your own vehicle due to accidental fire, theft or an accident.


A standard motor insurance will not cover certain losses, such as your own death or bodily injury due to a motor accident, your liability against claims from passengers in your vehicle (except for passengers of hired vehicles such as taxis and buses) and loss or damage arising from an act of nature, such as flood, storm and landslide. However, you may pay additional premiums to extend your policy to cover flood, landslide, landslip as well as cover your passengers. It is important to check your policy for the exclusions.
Important points to consider when buying motor insurance policies
Insured value/sum insured If you are buying a policy against loss/damage to your vehicle, you must ensure that your vehicle is adequately insured as it will affect the amount you can claim in the event of loss/damage. For a new vehicle, the insured value will be the purchase price while for other vehicles, the insured value is the market value of the vehicle at the point you apply for the insurance policy.

• Under-insurance – If you insure your vehicle at a lower sum than its market value, you will be deemed as self-insured for the difference, i.e. in the event of loss/damage, you will only be partially compensated (up to the proportion of insurance) by your insurance company.

• Over-insurance – Should you insure your vehicle at a higher sum than its market value, the maximum compensation you will receive is the market value of the vehicle as the policy owner cannot ‘profit’ from a motor insurance claim.

Duty of disclosure

Duty of disclosure You should disclose fully all material facts, including previous accidents (if any), modification to engines, etc. When in doubt as to whether a fact is relevant or not, it is best to ask your insurance company. If you fail to disclose any material fact, your insurance company may refuse to pay your claim or any claim made by a third party against you. In such cases, you are personally liable for such claims. Price The price you pay for your motor insurance will depend on the type of policy selected. The insurance premium charged by your insurance company is the standard minimum rate in accordance with the Motor Tariff. However, in addition to the standard minimum rate, your insurance company may impose additional premiums known as loadings to the premium payable in view of higher risk factors involved such as age of vehicle and claims experience. Loadings are governed by Bank Negara Malaysia (BNM) and no insurance company may charge loadings higher than the levels permitted by BNM.


No-claim-discount The premium payable may be reduced if you have no-claim-discount (NCD) entitlement. NCD is a ‘reward’ scheme for you if no claim was made against your policy during the preceding 12 months of policy. Different NCD rates are applicable for different classes of vehicles. For a private car, the scale of NCD ranges from 25% to 55% as provided in the policy. Excess Also known as a ‘deductible’. This is the amount of loss you have to bear before your insurance company will pay for the balance of your vehicle damage claim. The types of excess applicable are as follows:
Compulsory excess of RM400 – if your vehicle is driven by a person not named in your policy or a person named in your policy who is under the age of 21, the holder of a provisional (L) driving licence or the holder of a full driving licence of less than two years.
Other excess – applicable at the discretion of your insurance company and in some cases, no excess is imposed. You can negotiate with your insurance company on this excess.
Insurance policy
With the implementation of e-cover note in 2005, insurance companies will transit motor insurance information electronically to the Road Transport Department (RTD) and you will receive confirmation slip containing details of your motor cover as confirmation of the purchase of your motor insurance. Thereafter, within one month, you should receive:
• the Schedule which shows your name and address, details of the vehicle, the sum insured (for comprehensive and third party fire & theft policies), the period of insurance, the policy number, your NCD entitlement, premium breakdown, excess and named drivers;
• the certificate of insurance which shows your name, vehicle model, registration number and cubic capacity, period of insurance, authorised drivers and limitations of use. In some cases, this may be issued at the point of purchase in place of the cover note; and
• a motor policy which shows the terms and conditions of cover provided by your insurance company.
If you do not receive your policy within one month, you should check with your insurance company
What you should do in the event of an accident/loss
• Take notes of the accident – If you are involved in a motor accident, take notes of the accident, i.e. the names and addresses of all drivers and passengers involved, vehicle registration numbers, make and model of each vehicle involved, the drivers’ licence numbers and insurance identification as well as the names and addresses of as many witnesses as possible
• Make a police report – You are required by law to lodge a police report within 24 hours of a road accident.
• Notify your insurance company – You must notify your insurance company in writing with full details as soon as possible. Depending on the type of claim you intend to make, you may have to notify other insurance companies (please refer to ‘ Making a claim against an insurance company’ for details). If you fail to report the accident, you will be liable for your own loss as well as any third party claim against you.
• Select the workshop – You must send your damaged vehicle to a workshop approved by your insurance company. If the accident occurs during office hours, you may call the hotline/ emergency assistance numbers provided by your insurance company. Otherwise, you may call your insurance company for the nearest approved workshop. Should the accident occur outside office hours and you are making a claim against your policy, i.e. an own damage claim, you should ensure that your vehicle is towed to a workshop approved under the Persatuan Insuran Am Malaysia Approved Repairers Scheme [called a PIAM Approved Repairers Scheme (PARS)]. If you are making a third party claim, it is advisable to also send your vehicle to a PARS workshop.

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