Car insurance premiums are usually one of the most expensive parts of car ownership. Insurance providers consider a number of factors when determining how much you will be charged for the annual policy, such as age, gender, type of vehicles, location and claim history. The more factors included, the more expensive you will have to insure your car.
However, by knowing the different factors that affect your auto insurance rates, you can avoid spending more than necessary on a policy. Here are 10 possible tips to lower your car insurance costs:
1. Carefully choose the type of coverage
There are three main types of car insurance coverage offered by insurers, which are:
| Third party cover | The most basic car insurance policy. The insurer will not give you any protection for your car as it only covers you against losses, damages, or deaths caused to other parties. |
| Third party, fire, and theft cover | Everything above, plus coverage to your own vehicle in the event of accidental fire or when your car gets stolen. |
| Comprehensive cover | Everything above, including fire and theft, plus coverage to your own car if it gets damaged due to an accident. |
Before purchasing or renewing your insurance, you must consider conditions like the age of vehicle, driving habits and usual distance covered as these will help you decide the right type of coverage for your car.
Although it is always recommended to choose a comprehensive policy as it will provide the most coverage for your vehicle; a third party policy or third party, fire and theft policy might be suitable if you own an old car or a car that you rarely drive.
Related: 3 Main Types of Car Insurance Coverage (And What They Actually Cover)
2. Avoid modifications
It can be tempting to modify your car, but you have to be aware that any changes made to the vehicle can increase the price of your insurance. Insurance providers consider a car modified when you replace, add or remove a vehicle’s parts that are different to the manufacturer’s original specifications.
Any types of modifications to make your car look more attractive or perform better will not only increase its value, but also the risk of vehicle theft. Since the purpose of your insurance coverage is to cover that risk, you will be charged more on the premium.
Related: How Will Car Modifications Affect Your Car Insurance Policy?
3. Be a careful driver
This is obvious but is a helpful tip that may cut some costs on your insurance premium. You can keep the rates low by being more mindful on the road to decrease the possibility of getting into an accident and getting traffic tickets. Your claim and traffic records are also factors that can affect the cost of your insurance policy.
4. Limit the mileage
The more often you drive, the more likely you are to be involved in an accident. This is considered a risk that needs to be covered in your insurance policy. In other words, spending less time on the road will reduce the risk of getting into an accident. Therefore, the lower your annual mileage, the lower your premium is likely to cost.
5. Don’t overinsure or underinsure your car
When you insure your car based on the market value, there’s a possibility for you to underinsure and overinsure your car. Market value is how much your car is worth or priced at the dealerships before it was damaged or stolen.
The sum insured will be calculated based on the formula below:
Loss amount payable = Sum insured/Market value x Assessed loss
Car market value: RM75,000
a) Overinsuring happens when you insure your car above the market value. The claim amount will be subject to the market value of the car at the time of damage or loss.
For example:
You agreed to a policy contract insuring your car above the market value at RM65,000. When you get into an accident and your vehicle accumulates damages that cost RM15,000, your insurer will only provide the amount claimable based on the repair bill.
Loss amount payable = RM80,000/RM75,000 x RM15,000 = RM16,000
There’s a RM1,000 excess after the payout is calculated and this additional amount will not be credited back to you.
b) Underinsuring happens when you insure your car below the market value.
You insure your car for half of the market value at RM37,500. If your car is involved in an accident that causes damage amounting to RM15,000, your insurer can only cover half of the cost as agreed in the policy which is RM7,500 sum payable.
Loss amount payable = RM37,500/RM75,000 x RM15,000 = RM7,500
The balance RM7,500 will be borne by the policyholder.
Insurance companies advise insuring your car based on the agreed value as it allows the policyholder to claim according to the value that has been specified in the policy.
Related: #WhatIWishIKnew – What Happens If You Don’t Pay Your Car Insurance Premium?
6. Improve your credit score
Establishing a good credit history can help lower your car insurance premium. Many insurers refer to your credit information when calculating the insurance rate. If you have a reputation of having a bad credit score or bad history on your previous insurance claims, then your premium is likely to be higher. It’s always a good idea to check your credit report on a regular basis, and make sure that you maintain a good score.
Related: 6 Ways To Improve Your Credit Score
7. Build up your No Claim Discount (NCD)
No Claim Discount (NCD) is an entitlement or reward for you if there’s no claim made on your car insurance policy within the one-year insured period. Building up your NCD will help you to get a cheaper policy because insurers typically reward policyholders who never file for any claim. Some insurance companies also offer special discounts for those who have clean driving records. If this is you, you may qualify for a lower car insurance premium.
8. Only consider the add-ons you need
Most drivers usually purchase the comprehensive cover as the policy gives the option to include additional coverage in your annual premium. Some of the add-ons include windscreen protection, riot and strikes, special perils, additional named driver and more.
Instead of adding them all, just choose the ones that will benefit you the most such as the windscreen coverage. If you live in an area that is not prone to natural disasters, you don’t have to consider getting the special perils coverage. It entirely depends on your circumstances, like where you live and how many people in your household drive the car. Just get the add-ons that are only practical to your needs.
Related: 5 Types Of Car Insurance Add-ons (& Whether Or Not They’re Worth Getting)
9. Drive a car that’s affordable to insure
If you’re planning to buy a new car, compare the car insurance rates for the models you’re considering. For an expensive car from a high-end model, your insurance premium will likely be higher. Luxury cars come with high-class features like carbon fibre, hydrophobic window, auto lane keeping and other specialised specifications will cost you a lot of money to repair in the event of loss or damage.
Related: #BreakingItDown – Don’t Make These 9 Mistakes When Buying A Car
10. Make a pre-purchase comparison online
Car insurance premiums differ from one insurer to another. Keep in mind that the lowest price is not always the best option. You will have to do a lot of research on every insurance provider and make a comparison on the prices as well as the coverage and benefits they offer.
Ask yourself if the insurance is worth the price, if it’s not, continue doing the research and ask around. Make sure the insurance company you choose is reputable and that you're comfortable with the services included in their package.
Here at CompareHero.my, you can purchase or renew your car insurance online just at your fingertips. The best part is that you will get a free gift when you successfully make an application with us.
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