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7 Factors That Determine Your Car Insurance Premium

    Auto Insurance Rates

    Getting insurance for cars requires vehicle owners to pay a sum of money set by insurance providers in exchange for the coverage they get. In the insurance world, this sum of money is often referred to as ‘premium’.

    In line with the Liberalisation of the Motor Tariff, insurance companies weigh in various factors before deciding the premium owners have to pay. Let’s take a look at the seven factors that determine car insurance premiums to understand the process better.

    How insurance premiums work?

    Car insurance premiums will have a basic calculation. The cost of an individual car premium varies depending on the coverage the owner is looking for, other than the current year’s No-Claim Discount rate and the type of coverage. Due to this, vehicle owners are always encouraged to compare policies from several providers to secure the best deal.

    No-claim discount (NCD)

    NCD car insurance

    As mentioned above, NCD rates are one of the factors that determine an individual’s car premium. NCD rates range from 0 to 55 per cent depending on the age of the vehicle. Older vehicles tend to have higher NCD than newer ones, provided a claim has never been submitted. Basically, the higher the value of the NCD, the lower the insurance premium. Hence, avoiding claims is necessary to enjoy bigger savings on insurance premiums.

    Types of car insurance

    In addition to NCD, vehicle insurance is also influenced by the type of insurance policy one chooses. In principle, a comprehensive insurance policy is more expensive than a third-party coverage due to the range of coverage offered. New cars and cars under 10 years old (bought with a bank loan) are required to have comprehensive coverage, so their premiums tend to be higher compared to older vehicles.

    Manufactured year

    The year of manufacture of the car also affects the insurance price as it is directly related to the market value of the car. For example, a car manufactured in 2016 will be cheaper to insure than one manufactured in 2021. Since older cars have a lower market value than new ones, their insurance premium is more affordable.

    Market value

    Old Malaysian car Myvi

    Related to the above, a car’s market value plays a crucial part in the sum insured by insurance providers. Generally, vehicles with higher market values account for higher insurance coverage. However, the market value of cars tends to decrease yearly, indirectly causing insurance value to decrease.


    The location of residence is another factor insurers take into account before determining the final premium of cars. Insurance premiums for cars in urban areas are generally more expensive than those in rural areas due to factors such as risk assessment and market value. Likewise, insurance premiums in Peninsula Malaysia are higher than those in Sabah and Sarawak for the same reasons.

    Driving record

    Car accident

    Insurance companies also consider the driving record of vehicle owners before determining insurance premiums. Drivers with a poor track record are considered high-risk and often presented with higher insurance premiums than low-risk drivers because of the higher possibility of accidents. So, insurance companies charge higher premiums to commensurate the risk they need to bear for these drivers.


    Though it seems unlikely, insurers take occupation as one factor in deciding the car premium. Those who work at construction sites and other high-risk areas, such as mines and logging sites, may have to fork out a pricier policy due to the immediate risks at the workplace than others. Since the owner’s occupation influences vehicle usage, paying more insurance can sometimes be inevitable.

    Worried about expensive insurance?

    Vehicle insurance can vary depending on many factors stated above. But you can change this by using online platforms like Bjak that not only let you enjoy huge savings but also pay in instalments.

    Bjak’s Buy Now Pay Later enables you to pay for auto insurance and road tax renewal up to 12 instalments. Unlock the secret to financial freedom with Bjak, and you could stand a chance to pay as little as RM30/month for your car policy.

    Bjak is one of Malaysia’s biggest insurance comparison websites, offering policies from over 10 brands. Get your free insurance quote from Bjak today!

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