Friday, July 13, 2012

Motor Insurance - What if I under Insured?

If your Honda Civic is worth RM80,000 on the market (i.e. you can easily sell to anyone at this price) but in order to save money, you insured for only RM50,000 for motor insurance purposes.

What will happen if you have a claim?

The following extracted from Policy (Standard Clause):

If your motor vehicle at the time of any loss or damage (be it partial/total loss) insured against be of greater value than the insured value stated in the policy, you shall be considered as being your own insurer for the difference and shall bear a rateable proportion of the loss accordingly. However, this clause shall not apply unless the market value at the time of the loss exceeds the insured value by 10%. The market value of a vehicle would be determined in accordance to Endorsement 99 on "Indemnity In The Event of Total Loss Clause".

Basically it means you can not claim FULL in case of a total loss, instead of getting back RM50,000 you may only get back RM31,250 (RM50,000 x RM50,000 / RM80,000).

Is it a risk you willing to take in order to save on few hundred ringgit?