Car insurance myths are widespread, yet most guides stop at the basics, such as third-party versus comprehensive coverage and No Claim Discounts.
In this article, we’ll tackle the lesser-known misconceptions that even experienced Malaysian drivers often miss.
By busting these car insurance myths, you’ll avoid costly mistakes and get smarter protection for your car.
1. Lowering Your Car Insurance Coverage Saves You Money
Many Malaysians lower the sum insured in their car insurance to save on premiums.
Imagine insuring your car for RM30,000 instead of its actual RM60,000 market value; your renewal premium would drop instantly.
But here’s the catch: the Average Clause can really mess you up.
How the Average Clause Affects Your Car Insurance Payout
If you under-insure your car, most insurers won’t cover the full damage amount because the car was not insured for its true value. In simple terms, the insurer treats it as if you are only choosing to insure part of the car, so they will only pay that same proportion during a claim.
For instance, if your car is worth RM60,000 but you insure it for RM30,000, you’re only covered for half its actual value.
So, if you file an RM20,000 claim, the insurer pays just RM10,000, and you’ll cover the rest.
This happens because the insurance premium you paid was based on the lower value, so the insurer only provides coverage in that same amount.
Many drivers overlook this clause while trying to save on premiums. The money you save now could be gone when you need to make a big claim.
Bottom line: Always ensure your car is insured for its full market value. The small savings won’t be worth the financial pain later.
If you're new to car insurance, check out the types of car insurance to get a better idea of what’s covered.
2. Fine Print Nightmares: What Could Affect Your Car Insurance Coverage
You’ve signed the policy and paid the premium. But did you actually read the fine print?
Many people skip over the details, not realising that hidden terms can seriously affect their claims. Here are three important things to watch out for:
Excess Payments
The excess is your share of the repair cost, paid directly to the workshop. If you’re under 21, hold a P or L licence, or aren’t a named driver on the policy, you’ll face a fixed RM400 compulsory excess.
Some policies also have a voluntary excess based on your risk profile, which you can avoid by choosing policies without the voluntary excess feature.
Some insurers available on Policystreet offer an add-on to waive the cost of excess for a small extra fee. This is useful if you are subject to the cost of voluntary excess, giving you peace of mind during claims.
Betterment Charges
If your car is old, you might face betterment charges when you make a claim. This happens when the insurer replaces old, worn-out parts with new ones.
Because insurers only cover repairs based on the car’s existing condition, any upgrade (such as fitting brand-new parts that improve the car beyond its pre-accident state) results in betterment charges. This is especially common for cars over five years old.
However, some insurers offer add-ons that can be purchased to waive these charges. Check with your insurer through PolicyStreet to see if this is an option.
Depreciation on Payouts
Even if you have comprehensive coverage, your payout may differ depending on the type of coverage you have.
If your policy states that the payout is according to the agreed value, the payout in the event of an accident will be the fixed amount you set at the start of the policy. If your car is older and is insured at market value, the payout will be based on the car’s market value at the time of the incident.
Still confused about terms like "betterment," "excess," or "depreciation"? Take a look at some common terms for car insurance to help you understand your policy better.
3. NCD Nightmares: How One Missed Renewal Resets Everything
Your No Claims Discount (NCD) rewards years of accident-free driving, with savings up to 55% after five claim-free years.
In Malaysia, most insurers offer a grace period of 10 to 31 days, depending on the provider. During this time, your policy is still active, meaning you're covered.
However, when delaying car insurance renewal, your policy lapses, and any claims made during this time won’t be paid. Your NCD is usually retained, but if the renewal is delayed for too long, some insurers may reduce it by one level according to their internal policies.
Set automatic reminders and renew quickly through PolicyStreet’s car insurance platform to keep your NCD safe.
4. The Modification Minefield: When Your Upgrades Void Your Car Insurance
Love customising your ride? Aftermarket upgrades can void your car's manufacturing warranty and are not covered by your insurance.
Many Malaysian drivers modify their cars without telling their insurers. Upgrades such as performance chips, turbo kits, body kits, and custom rims can increase the vehicle’s value and theft risk, which ultimately changes its risk profile.
Own a modified ride? Compare insurers that accept declared modifications on renowned car insurance Malaysia agencies and stay fully protected without overpaying.
The Claims Risk
If you don’t tell your insurer about your car modifications, they can reject your claim or pay you less. This is because the car becomes different from what they originally agreed to insure.
In fact, some insurers have turned down claims when a car had undeclared performance upgrades, even if those upgrades didn’t cause the accident.
How to Protect Modified Cars
You might pay a bit more, but that added transparency ensures your customised car is covered if anything happens on the road.
Make sure you notify your insurer or declare your car modifications when you renew through PolicyStreet’s platform. This ensures your vehicle stays fully covered.
Here’s what to do:
Keep a list of all the changes made to your car
Make sure your sum insured reflects your car’s value after modifications
Keep your policy updated
PolicyStreet makes it easy to compare insurers and can help you with declaring modifications. It might cost a bit more, but it ensures your custom ride is protected.
5. The Loyalty Tax: Why Staying Put Might Be Costing You Money
Many drivers assume their long-time insurer will always offer a competitive renewal price. But premiums vary across insurers, and some may offer better deals for the same coverage.
A quick comparison of identical coverage often reveals price differences of 20 - 30%. That’s a few hundred ringgit you could save each year.
Take a moment to compare options before renewing your car insurance.
PolicyStreet helps you check quotes so you can pick the plan that gives you the best value in just 5 minutes.
PolicyStreet quotation options
Check out our step-by-step guide for first-time users that walks you through getting a quote, followed by paying for your policy and road tax renewal.
Ready to Find a Better Deal? Get Your Free, Informed Insurance Quote Now
These five car insurance myths reveal common misconceptions that can impact your protection and finances. Understanding the facts about car insurance and policy terms can help you avoid costly mistakes.
PolicyStreet makes it easy for Malaysian drivers to compare comprehensive car insurance plans and find the right coverage at competitive rates, empowering you to make informed decisions when buying insurance online.
Get your quote today and drive with confidence, knowing you've made the right choice.
Need personalised advice? Contact PolicyStreet or email us for expert support before renewing your car insurance.
