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  Consumer Alert - Motor Insurance (Private Car Policy)

Your car may well be the second most valuable asset that you own other than your house.  Here are a few things
that you should know when buying a motor insurance policy for your car.

Types of Car Insurance

Who and what is covered would depend on the type of car insurance that you have purchased.

Parties involved - 1st party is you; 2nd party is the insurance company; and 3rd party is the other persons in an accident.  



Death or injury to third party in an accident Damage to other person’s car or property   Damage to your car due to fire or your car is stolen Damage to your car due to accident
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Exclusions – Your standard comprehensive car insurance policy DOES NOT cover:

  • Your own death or bodily injury;
  • Your liability against claims from your passengers;
  • Theft of non-factory fitted vehicle accessories (compact disc players, leather seats, sports rim, etc.)
    unless the accessories are specified in the Schedule;
  • Consequential loss, depreciation, wear and tear, mechanical or electrical breakdown failures or breakages;
  • Loss/damage arising from an act of nature e.g. flood, landslide.


Please refer to your policy contract for the full list of exclusions under the policy.

However, you may pay additional premiums to cover some of the above exclusions e.g. flood, landslide or your
liability against claims from your passengers (a passenger who is a member of your household will not be

Case study: Ahmad and his sister’s injury claims were not payable

Ahmad bought a comprehensive car insurance policy and paid additional premium to buy legal liability to passenger cover. A few months later, while Ahmad drove his sister, Aida to town, the car skidded and knocked into a tree. Both Ahmad and Aida were injured in the accident.

The policy only covered the cost of repairing Ahmad’s car. Ahmad’s bodily injury claim was not payable because the policy does not cover death or injury to the person who bought the policy. Although Ahmad has a legal liability to passenger cover, Aida’s bodily injury claim was rejected because she was a member of Ahmad’s household.


What you should know when buying car insurance?


Duty of Disclosure 

When insuring your car, it is important that you disclose all material facts to your insurance company e.g. any
previous accidents and modification to engines. If you fail to do so, your insurance company may refuse your
claim or any claim made by a third party against you. In such cases, you are personally liable for those claims.


Market Value or Agreed Value Policy 


Comprehensive motor insurance can cover you against accidental loss of, or damage to, your car, up to either its: 

  • Market Value – what your car is worth just before the damage occurs; or 
  • Agreed Value – where you and your insurance company agree on the value of the car at the beginning
    of the contract and at each renewal.    

If your policy is based on Market Value:    

You must ensure your car is adequately insured as it will affect the amount you can claim in the event of
loss / damage. For new car, the sum insured is normally the purchase price. For other cars, the sum insured should
be based on the market value of the vehicle when you buy the policy.

  • Under-insurance: if sum insured is less than the market value, you are deemed as self-insuring the
    difference. In the event of a loss, you will only be partially compensated.
  • Over-insurance: if sum insured is higher than the market value, maximum compensation you will receive
    is the market value of the vehicle. You cannot profit from a claim (principle of indemnity).  

It is important to insure your car at the appropriate market value to avoid under-insurance or over-insurance.

With effect from 1 August 2011, your insurance company (and also takaful operator) or the agent must advise
you on the present market value of your car before you buy or renew your motor cover.

  • Advice on the present market value must be based on the ISM Automobile Business Intelligence System
    (ISM-ABI system) or any other credible vehicle valuation database.
  • The present market value of your car will be indicated in the renewal notice or product disclosure sheet
    issued to you before you buy the policy.
  • The advice will be provided to you without additional charge.
  • If you agree to insure at the value recommended by your insurance company, you will not receive a
    lower amount of compensation following a claim due to under-insurance.
  • To ensure consistency in the market value of your car at the point of purchase and subsequent claim,
    your insurance company should refer to the same database to determine the market value of your car
    in both instances.  

If your policy is based on Agreed Value:

You and your insurance company agree on the value of the car at the beginning of the contract and at each
renewal. If your car is totally destroyed or stolen, your insurance company will pay the sum insured in full.
A number of insurance companies are offering agreed value policy to their customers.

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