Introduction
Choosing the right sum insured for your car insurance is very important. Many drivers are not aware of the difference between market value and agreed value. If you choose wrongly, you may face under-insurance (getting less compensation) or pay a higher premium without real benefits. This guide will help you understand and make the right choice.
1. What is “Sum Insured”
The sum insured is the maximum amount your car insurance policy will cover.
According to Persatuan Insurans Am Malaysia (PIAM), the sum insured should not be lower than your car’s market value. If it is lower, you may need to cover the shortfall yourself.
2. Market Value (Current Market Price)
Definition: The value of your car at the time of claim, based on the current market.
Example: If your sum insured is RM100,000, but after 11 months your car’s market value drops to RM85,000, your claim will only be RM85,000.
✅ Pros: Lower premium.
❌ Cons: Payout decreases due to depreciation (around 10–15% per year).
3. Agreed Value (Pre-Agreed Price)
Definition: A fixed amount agreed between you and the insurer when you renew your policy. This value will not be affected by depreciation.
Example: If you set your agreed value at RM100,000, and your car is written off after 11 months, you will still receive RM100,000, even if the market value drops to RM85,000.
✅ Pros: Guaranteed payout based on agreed value. Useful if you still have an outstanding car loan.
❌ Cons: Higher premium. Not all insurers offer this option.
4. Market Value vs Agreed Value – Comparison Table
| Factor | Market Value | Agreed Value |
|---|---|---|
| Premium | Lower | Higher |
| Total Loss Payout | Based on current market value | Fixed agreed value |
| Under-Insurance Risk | High | Low |
| Best For | Older cars without loan | New cars or cars with loan |
5. When to Choose Agreed Value?
- New cars with outstanding loan – helps cover the full loan balance.
- Cars with special accessories or modifications – ensures fair compensation.
- Drivers who want peace of mind on payout amount.
6. When to Choose Market Value?
- Older cars without loan – lower premium, depreciation risk is not critical.
- If you want to save on premium and don’t mind lower payout.
7. Risks of Under-Insurance & Over-Insurance
- Under-Insurance: If your sum insured is below market value (e.g. insured at RM15,000 but actual value is RM20,000), your payout will be lower.
- Over-Insurance: Even if you insure above market value, payout is still based on actual market value. You will only waste money on higher premium.
Conclusion
- Market Value: Lower premium but payout decreases with depreciation.
- Agreed Value: Higher premium but payout is fixed, good for new cars or cars with loan.
- Key Tip: Always ensure your sum insured is not below your car’s market value to avoid under-insurance.
👉 To check the latest car insurance price in Malaysia, simply click the link below or check your summons online.