There are three main concepts within car insurance one must understand to make informed decisions before purchasing a policy. They are NCD, betterment and excess. Though they seem simple to some, these concepts can be the source of confusion during claim payouts and policy renewals, as they involve numbers.
But worry not- we’ve compiled everything in one place, so you can easily refer to it when you’re in doubt. Remember to save this link for future use. It can be incredibly helpful.
No-Claim Discount (NCD)
No-Claim Discount (NCD) is a discount given for vehicle insurance premiums by insurance companies. The waiver is set by Persatuan Insurans Am Malaysia (PIAM) to encourage safe driving. It acts as a reward/incentive for vehicle owners with good driving behaviour. NCD is also referred to as No-Claim Bonus (NCB) by some people.
The NCD rates for new vehicles start at zero in the first year of purchase and gradually accumulate over time. If no claims are submitted or made against the policy, private car owners can enjoy a maximum discount of 55% (from the sixth year onwards), while motorcycle owners get a maximum discount of 25% (from the 4th year onwards).
The NCB rates for private cars and motorcycles are listed in the tables below:
NCD for private cars
NCD for motorcycles
Betterment
Betterment charges, also known as “betterment fees” or “depreciation charges,” are terms commonly associated with auto insurance claims.
Betterment charges refer to the situation where an insurance company may require a policyholder to pay a portion of the cost of replacing a damaged part with a new one, even if the original damaged part was used or old. This is due to the concept of betterment or improvement – the idea that a replaced part is now “better” than the old one.
The betterment charges are usually charged for vehicles older than 5 years. The minimum rate starts at 15%, while the maximum is 40%. The rate differs based on the age of the vehicle, as illustrated below:
Compulsory Excess
Excess is the initial payment required when filing an insurance claim preceding the coverage provided by your insurer. It is often a fixed amount and compulsory for policyholders under certain scenarios.
Compulsory excess is a fixed amount (usually RM400) set by insurers towards young, high-risk drivers. Policyholders are required to pay this amount if they fall into one of the categories below:
- You or your drivers are below 21 years old
- Have a Probationary (P) or Learner’s (L) licence
- The vehicle damage is caused by unnamed drivers
An example of how compulsory excess works is shown in the table below:
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