What is betterment in car insurance?
ArticleFebruary 22, 2023
- What is betterment in car insurance or takaful?
The term betterment means that something has been made better or has been upgraded, and this leads to an increase in value.
In Malaysia’s car insurance or takaful, the replacement of a damaged car part with a brand-new original part after an accident claim is considered betterment. - Why is the betterment charge imposed?
If damaged car parts are replaced with new parts after an accident, you may benefit as the car will be in a better condition compared to prior to the accident.
So, betterment charge may be applied where you are required to bear a portion of the part replacement costs. - How do you determine the betterment charge?
The betterment charge that you will have to pay depends on the age of your car. For most comprehensive car insurance or takaful, the betterment charge is based on the betterment rate table shown below. The betterment rate is multiplied on the cost of the new replacement car parts to determine the betterment charge.
Age of your car Betterment rate applied (%) Less than 5 years old
0
5 15 6 20 7 25 8 30 9 35 10 and above 40 - How is the betterment charge applied in an accident claim?
For example, your 9-year-old car runs into an accident and you choose to replace the accident-damaged car parts with new ones that cost RM5,000.
Based on the table above, the betterment charge that you need to pay is 35% of the new part cost and this is equivalent to RM1,750 (RM5,000 x 35%). Your comprehensive car insurance or takaful will cover the remaining remainder of the cost, which amounts to RM3,250. - Is there a way around betterment?
To avoid paying for any betterment charges, you can request for used spare parts subject to availability. There could also be possible in a situation where there is no re-condition or used spare parts available, and the only option is to replace with brand new parts. In such cases, betterment may still be applied.
In some car insurance and takaful, you may have the option to purchase an add-on cover to waive the betterment charge in the event of an accident.
Under Zurich’s Z-Driver Comprehensive, this optional add-on cover is called “Waiver of Betterment”.
Wondering if your insurance or takaful provider charges betterment? Be sure to ask your insurance or takaful agent when you buy your policy or certificate, or as always read the policy carefully.