How To Choose The Right Type Of Motor Insurance For Your Needs

lady in car trouble

If you own a car in Malaysia, you have to buy motor insurance.

Under the Road Transport Act 1987, it is compulsory for all vehicles using Malaysian public roads to be insured. However, the type of insurance you buy is up to your needs.

Knowing the differences in car insurance out there as well as knowing the coverage of each insurance is essential in protecting our interest in the long-run.

What type of motor insurance coverage can you get in Malaysia?

In principle, there are three types of car insurance in Malaysia, ranging from the most basic protection to the one that gives an in-depth assurance to its driver.

types of car insurance in Malaysia

Source: PIAM

In the insurance world, the “first party” is you (i.e. the driver), the “second party” is the motor insurance company and the “third party” is basically everyone else.

Here’s how the different types of motor insurance works.

Third Party cover

A Third Party Cover insures you against any injuries or deaths caused to another person, as well as loss or damage to a third party property caused by your vehicle.

This policy provides the minimum level of protection to you in the event of an accident. With this type of policy, you cannot claim for any damages to your own vehicle. Third Party Insurance is the minimum level of coverage a driver needs in order to renew his or her road tax and legally drive on the road in Malaysia.

People who normally seek this type of coverage are those whose cars are old or no longer under a financing arrangement (e.g. hire purchase).

There might also be a “premium load” which a driver has to bear. The “premium load” is an extra amount added to the insurance premium to reflect a higher risk. Some insurance companies may require the driver to get other forms of insurance coverage (such as a Personal Accident Insurance) in order to secure this policy.

Third Party, Fire and Theft cover

A Third Party, Fire and Theft policy costs more than a Third Party Cover.

What this policy does is to protect you (i.e. the driver) against claims by a third party, be it bodily injuries or death, third-party property loss or damage caused by your vehicle. This is essentially the same as a Third Party Cover, but with the added coverage of damages from fire and theft of your vehicle.

For this type of policy, the insured amount for third party damages is high (sometimes unlimited), but the insured amount on fire and theft is lower.

Comprehensive cover

A Comprehensive Car Insurance package covers a wider range of protection, notably to both first and third parties (first party is you, the driver, while third party is everyone else). With this type of policy, you basically enjoy the same coverage as in a Third Party, Fire and Theft policy, but with the added coverage of damages to your own vehicle (i.e. not just limited to fire and theft).

In the car insurance industry, the standard practice for stolen vehicles or total loss claims is to compensate the policyholder based on the market value of the vehicle at the time of loss (or damage), or the sum agreed in the policy, whichever is lower. Some insurance companies however reimburse the policyholder based on an agreed car value specified in advance in an agreement with the policyholder, rather than the normal market or resale value.

This policy is normally only available to vehicles that have not exceeded a certain age. You should consider getting this type of policy if you own a relatively expensive car, as the more valuable your car is, the more significant this policy package will be for the driver.

Berjaya Sompo Car Insurance

Berjaya Sompo Car Insurance

Get your car insurance claim reimbursement within an hour

Comprehensive coverage and direct settlement of up to RM5,000

What is not covered by standard motor insurance?

Note that in all three car insurance packages outlined above, none of them provides protection to injury or death sustained by the driver or passenger of the policyholder.

Most standard motor insurance policies come with exclusions like:

  • 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)
  • loss or damage arising from an act of nature (flood, storm and landslide)*
    *subject to additional premiums

Policyholders can always extend their motor insurance coverage to include extra benefits like acts of nature (flood, landslide and landslip), windscreen damage, civil unrest, add additional drivers, passenger liability or even additional business use.

Liberalisation of motor insurance since 2017

This move allowed insurance companies to introduce new products with more flexible pricing based on individual risk levels.

Today, most insurance companies have started selling car insurance either online or through their app. Customers can now compare, apply, buy and file claims for their motor insurance online.

Check out the different car insurance provided by the motor insurance companies in Malaysia.

This article was first published on October 9, 2012 and has been updated for freshness, accuracy and comprehensiveness.

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