Wondering why is your car insurance expensive? Every car owner knows that owning a car means that it is compulsory to purchase car insurance. We believe that many of you out there must be wondering “Why is my car insurance so expensive?” or something along the line of “Why do I have to pay so much for it?”. There are many factors as to why car insurance is expensive. This article will explain those factors that you need to know.
Factors That Cause Your Car Insurance To Be Expensive
While the majority of these factors are manageable, there are times when your rate may rise or fall for reasons beyond your control. Below are the factors that you should know:
1. What Is Your Age?
Generally, younger drivers pay more contribution as they are considered less experienced at the wheel compared to older drivers and are statistically more likely to be involved in an accident. So not to worry if you are paying more expensive car insurance now as with more driving experience your car insurance will be lower.
2. Which Gender Are You?
The insights have demonstrated that transport accidents are the third-highest reasons for death for men and fifth for women. Hence, your gender affects your car insurance premium. Unfortunately, in Malaysia even with the numbers of men versus women are debatable. Male drivers still pay for more expensive car insurance compared to female drivers.
3. Where Do You Live?
Living in the city is the dream for the youngsters. Apart from having more career opportunities and it’s developed modern cities. There is a disadvantage as the roads are more congested and highways are bustling with traffic.
Selangor, Johor and Kuala Lumpur have the highest number of road accidents according to the annual Transport Statistics. These states recorded a high number of accidents and traffic violations as compared to rural states like Perlis, Terengganu and Kelantan.
Due to the higher number of drivers the likelihood of accidents is higher hence the premiums are more expensive. So, if you are currently living in one of the big cities, do expect that your car insurance will be expensive.
4. What Is The Type of Car Insurance You Chose?
One of the most important factors that determine if you will be paying expensive car insurance is the type of coverage you choose to have. In Malaysia, you get to select from three different choices: third party, third party, fire, and theft and comprehensive cover.
Here’s a summary of what they include:
The third-party coverage is the most basic of all. It only covers the third party involved in the car accident. So if you are at fault, third-party insurance would cover for the cost of damage, death, and/or injury to the other party but not to you and your car.
Third-party, Fire and Theft
While the only difference between the third party and third party, fire and theft is that aside from covering the third party damages similar to third party insurance, it also has an additional coverage to your own vehicle against fire and theft. That case, if your car were ever caught on fire, or gets stolen you can claim from your insurance company based on the policy.
The most complete coverage anyone can get is the comprehensive coverage. It covers everything that the third party offers as well as fire and theft coverage. Plus, the policy also covers your own car if it gets damaged due to an accident.
5. What Is Your Car’s Market Value?
The unfortunate thing about the vehicle is that it depreciates over time, unlike property where the value increases each year. In just one year, a car market value drops by 20%, depending on the car brands and models. After five years, you could expect that your car’s value will only be worth about 40% of what you have originally bought it for.
It is crucial to know your car’s market value because it affects the total value of your car insurance or the value you are going to insure for. It is not wrong if you decide to over-insure or under-insure your car. However, if you did the latter, you may be under-compensated by your insurance company.
While overvaluing your car, on the other side means that you would need to pay for more expensive car insurance but will only be compensated for the market value of the car. Our advice is that to avoid paying expensive car insurance is to insure your car according to the market value.
6. What Is The Status of Your No Claim Discount (NCD)?
Experienced drivers have a higher chance of getting less expensive car insurance, especially if they do not make any claims for a year or more. As they are entitled to a No Claim Discount (NCD) which gives them discounts on the next year’s motor vehicle premiums. The discount rates are fixed by Persatuan Insurans Am Malaysia (PIAM) and range from 0% to 55% off the motor premium. It however still depends on the type of vehicle you owned, the coverage and number of claim-free years.
7. How Old Is Your Car?
The reality is that older cars are considered high risk on the road. So if you are thinking about getting a second-hand car which has been a few years in the market, you better think again else you are likely to be paying for expensive car insurance. This probably is caused by outdated safety features and potential vehicle failure. There are also cases where older cars are not eligible for insurance. If your car is above 15 years old, you are only eligible for a third party car insurance policy.
8. What Is Your Driving Style?
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 is a higher chance for your premium to be more expensive than before. Even if you were the victim in the car accident, there is still a chance that you will need to pay for car insurance that is expensive because of the risk you recorded.
Insurance companies have a tendency to look into your driving record to see if you are categorized as a high-risk driver. As you already know that the higher the risk means the higher the premiums will be. Insurance companies will review every traffic violation, summon and past accident. Maintaining a clean driving record, obeying the traffic rules will do good to your pocket in the long run. So remember, drive safely and you could be saving yourself from paying expensive car insurance.
9. What Type of Car Do You Drive?
On top of the standard factors such as your vehicle model and engine capacity, most insurance companies also take into consideration certain factors like the following:
Industry safety reports have shown that vehicle’s susceptibility to damage, occupant injury or theft leads to a higher premium. Vehicles that fare better than the industry standard tends to have lower premium rates applicable to it. If your car has a higher than average safety rating, it means that your car insurance is less expensive compared to others.
Cost of Repair
Certain types of vehicles are more expensive to insure than others as the cost of repair or replacement in the event of theft or total loss is higher.
Coverage for Others
Your insurance does not only cover for the damages to your own vehicle, instead, it also covers other road users against any accidents that are caused by you. This means that even if you own a lower value vehicle, it does not automatically result in you having a lower premium.
Any modification made to your vehicle such as making it more powerful or looking different from the original might result in you having more expensive car insurance. Do note that the failure of informing your insurance company of such modifications could also result in the invalidity of your policy should there be any claim in the future.
10. Do You Have Any Add-ons?
Everyone loves to have the added value but nobody likes the additional costs it comes with. Well, the case is similar to car insurance premiums. Insurance companies tend to provide a range of attractive add-ons but it always comes with a cost. If you are interested in it and do happen to have extra money, you should consider taking advantage of it.
Did you know that Qoala offers free quotes from insurance companies? Not only that, you do not need to wait for a day as it is instant upon submitting a few details such as your car plate number, identification card, location and postcode. You will never have to worry about car insurance being expensive anymore.