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Tender Value And Sum Insured

Tender Value And Sum Insured Blog

Have you only purchased a vehicle and you are looking for the best car insurance deal? Are you having problems with understanding some terms related to the insurance policy, especially those related to the car’s value? Insurance users are often having problems understanding the “sum insured” and how it can be different from the tender value and the cost you paid for the vehicle. Let’s try to explain the difference between tender value and sum insured.

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What Is The Sum Insured?

Once the insurance company offers you a contract, make sure to read it before signing the policy. A crucial thing to consider will be the “sum insured.” That term refers to the maximum amount that the car insurance company is ready to pay over the specified policy time. For example, you will sign a car insurance policy deal for 12 months. If the sum insured is RM30,000, that is the maximum insured amount for your vehicle. It is the maximum payable sum that the insurer can pay for claims that meet the policy requirements.

How To Determine The Sum Insured?

Here is a good question – how do you determine the sum insured for your vehicle? The crucial factor to rely on is the current market value. Now, the current market value depends on many factors. Those could include:

  • Mileage – the general rule is that fewer miles equal higher market value. The idea is that a car with lower mileage (for example, 50,000 kilometers) is in better condition than the one that passed 150,000 kilometers.
  • Overall interior and exterior condition – any visible damage or missing parts could affect the market value. Also, regular servicing could add to the value of the vehicle.
  • Add-ons and other modifications – did you change any component on the car or added a modification? That could both increase or decrease the price, depending on what you changed.
  • How long you have been driving it – the general rule is that older vehicles have a lower market value than new cars.

The insurance company and the user should agree on the value of the vehicle that will be insured. That is known as the Agreed Value of the car. This estimation must match the actual market value of the vehicle. If you agree to a significantly smaller value estimation, the payout limit might not be able to cover the actual damages your vehicle suffers in an accident.

What Is A Tender Value?

Before deciding on the tender value, we need to consider what a tender is. A tender is a process where public companies or institutions offer other parties to perform work or buy assets or property from them. For example, the Malaysian government published a vehicle fleet tender and attracted big company names. Each tender will have specific conditions. Every bidder needs to meet them so that they have a chance of their bid getting accepted. The institution that published the tender will accept single or multiple winning bids, depending on the terms.

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The tender value is the estimated cost for providing services or buying properties covered in the tender. If we are discussing vehicles, the tender value might be similar to the sum insured. However, that doesn’t have to be the case always. It will always vary from one situation to another and depend on various factors related to the particular vehicle.

Nick Lai
the authorNick Lai
Founder & CEO of NickMetrics Group

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