Introduction
The signs of an under-insured car are often overlooked because many owners simply hit “renew” without checking their current coverage value. When coverage is lower than the car’s market value, you risk reduced claim payouts or compensation far below actual repair costs.
This situation is common in Malaysia due to yearly changes in car value, added accessories, or owners choosing lower coverage to save on premiums without realizing the risk.
1. Coverage Value Not Updated
Car value depreciates every year. If owners don’t review the current value and rely on system suggestions that are too low, the policy automatically becomes under-insured. This is more common with older cars, as depreciation is often not updated.
2. Added Accessories Not Reported
Many owners install rims, audio systems, sport absorbers, or body kits but fail to inform the insurer. When accessory value increases but the policy remains the same, the car becomes under-insured. In case of an accident, added accessories may not be covered.
3. Choosing Low Coverage to Save on Premiums
The most common reason: owners select a low coverage value to reduce premiums. However, in the event of a major accident, insurance will only pay a portion of the costs based on the under-insurance ratio. The owner ends up bearing a large portion of the repair cost.
4. New Car Modifications Not Updated
A new car with premium tinted windows, dashcams, spoilers, or sport rims increases in value. If the policy still uses the base value, even small changes can make the car under-insured.
5. Major Repairs Not Updated
After an accident, owners may carry out significant repairs that increase the car’s value. If the next year’s policy still uses the old value, coverage does not match the current car value, keeping the risk of under-insurance.
6. Claim Paid Partially (Pro-Rata Deduction)
The clearest sign of an under-insured car usually appears after an accident. If the insurer only covers part of the repair costs despite clear damage, it indicates your coverage is lower than the actual value of the car.
Conclusion
Signs that your car is under-insured can be identified if owners take the time to review coverage value at each renewal. Ensure coverage aligns with the current car value to avoid reduced payouts or significant financial loss in an accident. By choosing the correct value and updating accessories or repairs, you can maintain adequate protection and minimize financial risk.
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