Special perils coverage is a popular add-on coverage that most people consider when renewing car insurance because a standard car policy usually doesn’t include it. Cars are highly susceptible to damage caused by acts of nature, so add-ons that protect them from natural disasters are crucial.
But did you know that there are actually two types of coverage options for natural disasters that vehicle owners can choose? In this article, we will explore the two types of special perils coverage in auto insurance by learning their differences and their suitability for car owners.
Types of Special Perils Coverage
Natural disaster coverage in vehicle insurance exists in two forms. One is called full special perils cover, and the other is limited special perils cover.
As the name suggests, full and limited coverages are primarily different in the amount of coverage and compensation offered to policyholders in the event of unforeseen damage due to convulsions of nature. It enables policyholders to get compensation for vehicle damage caused by natural disasters as listed in the car or motor insurance policy.
Differences between full and limited coverage
Usually, insurance companies charge a premium anywhere between 0.2% to 0.5% of the sum insured. So, if the sum insured for your vehicle is RM50,000, then the additional premium you would need to pay for special perils would range from RM100 to RM250. Remember that most insurance policies do not include this coverage in the basic premium, which requires you to pay this additional premium for added protection.
A full special perils coverage offers complete and better protection for vehicles as they absorb the entire repair cost. It protects your vehicle 100% against damages and pays full compensation depending on the repair cost. However, limited special perils only cover up to 50% of the vehicle’s value. This means the Sum Insured and the compensation offered for repairs are partial.
The main differences between full and limited special perils coverage are illustrated in the table below:
Here is an example of a scenario to further explain the difference between the two. Let’s say Abu insured his vehicle at a value of RM50,000 with Company X. He has the option to purchase a full special peril add-on or limited special peril cover add-on.
If he buys limited special peril coverage, he will pay a lesser premium than full coverage. However, as shown in the table below, he must bear repair costs higher than the sum insured for limited special perils.
Which type to consider?
Many vehicle owners in Malaysia often go for full special perils coverage to protect their vehicles from floods and landslides, the country’s two most frequent natural disasters. As vehicle repairs cost a fortune, paying a slightly higher premium to afford full coverage makes sense.
However, this doesn’t mean limited coverage is not worth considering either. While it’s true that limited coverage may incur additional out-of-pocket expenses for car owners in the event of severe damage, their financial situation needs to be taken into account when selecting which add-on to go for.
If you don’t drive much and live in an area free from floods and landslides, it may be worth going for partial coverage. This can save you some bucks that would otherwise be spent on paying higher premiums. In any case, consider your financial background, living environment and driving habits before deciding.
Protection from natural disasters
Special perils coverage remains an essential add-on that every car owner should consider when purchasing an insurance policy. Natural disasters are highly unpredictable, especially recently with fluctuating weather patterns, so preparing for them is crucial.
Whether or not you should take the full or limited coverage really comes down to the factors mentioned above. Always consider various circumstances before purchasing your insurance policy.
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