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When it’s time to renew your car insurance, you need to know and decide on the sum insured for your car. Should you go with market value or the agreed value for the sum insured? But before that, you need to know that the sum insured provides adequate protection in case of total loss and damage. In this article, we will provide an explanation on the sum insured meaning.
Car Sum Insured: Market Value vs Agreed Value
The sum insured refers to the amount of insurance coverage for your car, representing the maximum claimable amount from your insurance company. It’s important for the sum insured to match the market value of your car. This ensures that if your car is completely damaged or lost, you won’t have to pay the difference out of your own pocket.
Since the value of your car depreciates every year, the sum insured value would also decrease annually.
How to Choose the Appropriate Value for Sum Insured?
When you are buying or renewing your car insurance, you will be presented with two sum insured options – market value and agreed value.
Market Value
If you choose market value, the insurers will base the sum insured based on the market value of your car. Put simply, market value refers to the insured amount of a vehicle, which is based on its current market price at the time of purchasing insurance. This value is usually determined by factors like the brand, model, and year of manufacture of the vehicle.
Agreed Value
Other than market value, the sum insured can also be based on the agreed value. Agreed value means that your car is insured based on a value that both you and the insurance company agree upon when you purchase the insurance for your car.
It’s important to note that the premium for this type of insurance will be higher than for market value coverage. This is because the coverage amount remains unchanged, even if the market value of your car depreciates.
It will provide you with peace of mind with guaranteed compensation in case of a total loss, regardless of depreciation.
Why Is It Important to Choose Appropriate Value for Sum Insured
When choosing the coverage amount or the sum insured for your car, be sure to check that you are not under-insuring or over-insuring your car. What are the implications of both situations?
If you under-insure your car to pay a lower insurance premium, you risk not receiving full compensation for any loss or damage. On the other hand, if your car is over-insured, you’ll have to pay extra for your insurance premium.
However, this may not be worth it because insurers will only compensate you based on the current market value of your car.
Factors that May Affect the Sum Insured Value
When it comes to the sum insured for your car, several factors are taken into consideration that will determine the sum insured for your car:
1. Value of Vehicle
The insurers will look at the market value of your car and this will influence the sum insured for your car.
2. Vehicle’s Age
The newer your car is the better the market value and the older your car gets, the lower the sum insured will be.
3. Car Model and Make
The insurers will also look at the make and model of your car to determine the sum insured value. Luxury cars will have a higher sum insured value and that means a higher insurance premium to be paid!
4. Add-Ons and Accessories
Perhaps you have added on special features or additional coverage like zero depreciation, the insured value will be adjusted accordingly.
5. Location of Car
Usually, where the car is usually parked and used would influence the sum insured value as well. Areas that are prone to theft and accidents may influence the amount of coverage.
Where to Find the Best Car Insurance?
Each year, when it’s time to renew your car insurance, make sure to check the current market value of your car. This ensures you don’t under-insure or over-insure your vehicle, providing adequate coverage for peace of mind. For the right sum insured for your car, visit Qoala.my for more info!
Qoala.my is Malaysia’s largest insurance comparison platform. They offer free comparisons of available insurance options, making it convenient to purchase insurance online. It’s a simple, fast, trusted, and transparent way to find the best car insurance for your needs.
