Source: http://www.meshio.com/
I found this article in meshio very informative. IF you need more info, I would suggest you to buy this book Guide to Smart Insurance Planning by meshio. Below is some preview on the book:
I found this article in meshio very informative. IF you need more info, I would suggest you to buy this book Guide to Smart Insurance Planning by meshio. Below is some preview on the book:
1) Personal Accidental Coverage
One of the most important coverage you should have is Personal Accidental Coverage. Not only because it? one of the most affordable coverage, the possibility of you claiming from a personal accidental policy is much higher than say, natural death or a critical illness claim. Personal Accidental coverage protects you from accidental risk, which means any injury or death caused by accident, you can make a claim, for example, losing a leg or accidentally cutting off a finger while preparing your dinner. This is not to be mistaken with Total Permanent Disability (TPD), whereby the term TPD usually is defined as:
(a) becomes total and permanent and such that the Life Assured is incapable of ever engaging in any work, occupation or profession in the future to earn or obtain any wages, remuneration or profit; or
(b) is deemed to be caused by any of the following:
(i) total and irrecoverable loss of sight of both eyes;
(a) becomes total and permanent and such that the Life Assured is incapable of ever engaging in any work, occupation or profession in the future to earn or obtain any wages, remuneration or profit; or
(b) is deemed to be caused by any of the following:
(i) total and irrecoverable loss of sight of both eyes;
or
(ii) loss of use of two limbs at or above the wrist or ankle;
or
(iii) total and irrecoverable loss of sight of one eye and loss of use of one limb at or above the wrist or ankle.
(c) Or by unable to fulfil any 3 of the following activities:-
(c) Or by unable to fulfil any 3 of the following activities:-
i) Transfer
ii) Mobility
iii) Continence
iv) Dressing
v) Bathing/Washing
vi) Eating
From the definitions above, you can see that it? not that easy to comply with TPD? requirements. If you happen to lost only one leg in a fatal accident, your TPD policy will payout literally RM 0.00 sen. And the odds of getting into an accident are in comparison, very much higher than any other risk that we might encounter every day. And there? one more reason why you must have a Personal Accident benefit in your risk management portfolio- it? dirt cheap, and the insurance charges rate is the same from cradle to grave (there? a entry limit though, which is usually around 60 years old).??br /> Here? a typical Personal Accident rate.
A typical Personal Accident premium rate offered by Malaysia insurance companies.Source: www.insuranceonline.my
As, you can see from the rates above, a RM 300,000 Personal Accident coverage with Weekly Benefit cost only about RM 405 a year, that? RM 33.75 per month, and it? renewable at the same rate as long as you can afford it. So you should look up into your dusty policy documents to check if you have a Personal Accident Coverage either attached as a rider or as a stand-alone plan. Consider checking with the company you are working for to see if they?e a Group Personal Accident Coverage for staff. Companies should also have given you PERKESO benefits, but the limit for PERKESO is capped to a monthly salary of RM 3,000 as at the time of this writing. To check the benefits covered under PERKSO, go to www.perkeso.gov.my
For a 30 years-old working adult, I would suggest a minimum of RM 500,000 Personal Accidental Coverage. If you are married, consider getting a Family Accidental Coverage for your spouse and your children since it? generally cheaper this way.
Some credit cards even give free Personal Accidental coverage for a year at no cost at all!
To add Personal Accidental coverage into your risk management portfolio, check out www.insuranceonline.my.
In the next post, I?l cover the next type of insurance that you should consider to be part of your fundamental risk management strategy-
From the definitions above, you can see that it? not that easy to comply with TPD? requirements. If you happen to lost only one leg in a fatal accident, your TPD policy will payout literally RM 0.00 sen. And the odds of getting into an accident are in comparison, very much higher than any other risk that we might encounter every day. And there? one more reason why you must have a Personal Accident benefit in your risk management portfolio- it? dirt cheap, and the insurance charges rate is the same from cradle to grave (there? a entry limit though, which is usually around 60 years old).??br /> Here? a typical Personal Accident rate.
A typical Personal Accident premium rate offered by Malaysia insurance companies.Source: www.insuranceonline.my
As, you can see from the rates above, a RM 300,000 Personal Accident coverage with Weekly Benefit cost only about RM 405 a year, that? RM 33.75 per month, and it? renewable at the same rate as long as you can afford it. So you should look up into your dusty policy documents to check if you have a Personal Accident Coverage either attached as a rider or as a stand-alone plan. Consider checking with the company you are working for to see if they?e a Group Personal Accident Coverage for staff. Companies should also have given you PERKESO benefits, but the limit for PERKESO is capped to a monthly salary of RM 3,000 as at the time of this writing. To check the benefits covered under PERKSO, go to www.perkeso.gov.my
For a 30 years-old working adult, I would suggest a minimum of RM 500,000 Personal Accidental Coverage. If you are married, consider getting a Family Accidental Coverage for your spouse and your children since it? generally cheaper this way.
Some credit cards even give free Personal Accidental coverage for a year at no cost at all!
To add Personal Accidental coverage into your risk management portfolio, check out www.insuranceonline.my.
In the next post, I?l cover the next type of insurance that you should consider to be part of your fundamental risk management strategy-
2) Medical & Hospitalization Insurance.
This is another coverage that you should already have in your risk management portfolio. Let? face it, after the probability of meeting with an accident, the next most possible misfortunate event would be landing up in the hospital and having to stay overnight for observations. Your stay in the hospital could be due to an unknown cause, accident-related and probably common symptoms such as dengue or appendix removal, but rest assure it? going to cost you money. If you are admitted to a private hospital, it? going to cost you LOTS of money.
So, what exactly is covered under this category of insurance?
For start, the core coverage would be the Standard Room & Board (R&B) package, not unlike a hotel room package. The packages usually is categorized as follow:
(i) Room & Board RM 100
(ii) Room & Board RM 150
(iii) Room & Board RM 200
(iv) Room & Board RM 300
Room & Board RM 200 means that the coverage entitles you to stay in wardroom package of RM 200. However, you can still request the hospital to upgrade your room to a better package, but there would be terms and conditions applied according to respective insurance companies.
The Annual & Lifetime Limits is tied to the R&B. Generally, the following R&B packages will have the following Annual & Lifetime Limits:
(i) Room & Board RM 100: RM 60,000 (Annual) and RM 200,000 (Lifetime)
(ii) Room & Board RM 150: RM 90,000 (Annual) and RM 300,000 (Lifetime)
(iii) Room & Board RM 200: RM 120,000 (Annual) and RM 400,000 (Lifetime)
(iv) Room & Board RM 300: RM 180,000 (Annual) and RM 600,000 (Lifetime)
You should refer to your policy? actual schedule of benefits to find out the exact figures. The annual & lifetime limits are deducted as you make claims.
This is another coverage that you should already have in your risk management portfolio. Let? face it, after the probability of meeting with an accident, the next most possible misfortunate event would be landing up in the hospital and having to stay overnight for observations. Your stay in the hospital could be due to an unknown cause, accident-related and probably common symptoms such as dengue or appendix removal, but rest assure it? going to cost you money. If you are admitted to a private hospital, it? going to cost you LOTS of money.
So, what exactly is covered under this category of insurance?
For start, the core coverage would be the Standard Room & Board (R&B) package, not unlike a hotel room package. The packages usually is categorized as follow:
(i) Room & Board RM 100
(ii) Room & Board RM 150
(iii) Room & Board RM 200
(iv) Room & Board RM 300
Room & Board RM 200 means that the coverage entitles you to stay in wardroom package of RM 200. However, you can still request the hospital to upgrade your room to a better package, but there would be terms and conditions applied according to respective insurance companies.
The Annual & Lifetime Limits is tied to the R&B. Generally, the following R&B packages will have the following Annual & Lifetime Limits:
(i) Room & Board RM 100: RM 60,000 (Annual) and RM 200,000 (Lifetime)
(ii) Room & Board RM 150: RM 90,000 (Annual) and RM 300,000 (Lifetime)
(iii) Room & Board RM 200: RM 120,000 (Annual) and RM 400,000 (Lifetime)
(iv) Room & Board RM 300: RM 180,000 (Annual) and RM 600,000 (Lifetime)
You should refer to your policy? actual schedule of benefits to find out the exact figures. The annual & lifetime limits are deducted as you make claims.
Co-insurance is a commonly used phrase in medical insurance packages. It simply means that you as the policyholder need to pay a certain percentage from the total claims made. If your policy did not mention anything on co-insurance, it would usually mean that the fee is 100% borne by the Company.
For instance, you are hospitalized for 3 days, and used up a total of RM 6,780.24. Assume that the co-insurance of your medical package is 10%, capped at RM 500, you will need to fork out:
RM 6,780.24 x 10% = RM 678.02
Since the co-insurance is capped at RM 500, you will only need to fork out RM 500, instead of RM 678.02.
Here are some other important elements in the medical coverage that you should be concerned about:
(i) Pre-hospitalization and Post-hospitalization claims, where you need to find out how many days of pre-hospitalization and post-hospitalization is claimable.
(ii) Limits payable for outpatient treatments; for Accident, Cancer and Kidney Dialysis respectively
(iii) Room & Board and Intensive Care Units (ICU) with coverage usually upto 90 days.
Prosthetics, equipments and accessories such as wheel chairs or artificial teeth used during your stay in the hospital are usually not claimable. In most instances, government tax and service tax imposed in your bill are not claimable either.
Handy tips for Medical Insurance Policy:
(i) You should always keep the Original Receipt to ensure a speedy claim.
(ii) Declare all your health and medical track records when you are applying to ensure that you will not have problem with your claims later on. Ask your parents about any hereditary diseases that you might have inherited.
(iii) Always keep your Medical Card by your side, together with your girlfriend/boyfriend photo.
(iv) You will probably need to foot a deposit even if you have a valid Medical Card, so it’s best to have a credit card to avoid any problems with the profit-oriented health institutions.
(v) Go for the best possible medical insurance package you can afford, as it is easier to downgrade your package than it is to upgrade. Nonetheless, as long as you have a good health record, upgrading should not be a problem, except that you most likely have to pay for the medical check-ups yourself.
To conclude, due to the high possibility of you landing in a hospital, a medical insurance plan should be in your priority especially when you?e shopping for your first insurance policy.
Until banks or private hospitals are ready to provide medical loans which you can pay by installments, it? a good idea to ensure your entire family is protected at least with a minimal amount.
In the next section, I will talk about the importance of Critical Illnesses Coverage, and why it is important in your risk management strategy. Unlike the medical plan coverage mentioned here, a Critical Illnesses Coverage is where all the common big tickets illnesses are covered.
For instance, you are hospitalized for 3 days, and used up a total of RM 6,780.24. Assume that the co-insurance of your medical package is 10%, capped at RM 500, you will need to fork out:
RM 6,780.24 x 10% = RM 678.02
Since the co-insurance is capped at RM 500, you will only need to fork out RM 500, instead of RM 678.02.
Here are some other important elements in the medical coverage that you should be concerned about:
(i) Pre-hospitalization and Post-hospitalization claims, where you need to find out how many days of pre-hospitalization and post-hospitalization is claimable.
(ii) Limits payable for outpatient treatments; for Accident, Cancer and Kidney Dialysis respectively
(iii) Room & Board and Intensive Care Units (ICU) with coverage usually upto 90 days.
Prosthetics, equipments and accessories such as wheel chairs or artificial teeth used during your stay in the hospital are usually not claimable. In most instances, government tax and service tax imposed in your bill are not claimable either.
Handy tips for Medical Insurance Policy:
(i) You should always keep the Original Receipt to ensure a speedy claim.
(ii) Declare all your health and medical track records when you are applying to ensure that you will not have problem with your claims later on. Ask your parents about any hereditary diseases that you might have inherited.
(iii) Always keep your Medical Card by your side, together with your girlfriend/boyfriend photo.
(iv) You will probably need to foot a deposit even if you have a valid Medical Card, so it’s best to have a credit card to avoid any problems with the profit-oriented health institutions.
(v) Go for the best possible medical insurance package you can afford, as it is easier to downgrade your package than it is to upgrade. Nonetheless, as long as you have a good health record, upgrading should not be a problem, except that you most likely have to pay for the medical check-ups yourself.
To conclude, due to the high possibility of you landing in a hospital, a medical insurance plan should be in your priority especially when you?e shopping for your first insurance policy.
Until banks or private hospitals are ready to provide medical loans which you can pay by installments, it? a good idea to ensure your entire family is protected at least with a minimal amount.
In the next section, I will talk about the importance of Critical Illnesses Coverage, and why it is important in your risk management strategy. Unlike the medical plan coverage mentioned here, a Critical Illnesses Coverage is where all the common big tickets illnesses are covered.
I am planning to buy a medical card for my wife, the insurance agent suggest investment link policy which I think is not a good advice after reading meshio guide.
I am considering between this two ING and Great Eastern.
ING MEDIPLUS: (Good Information)
http://www.insured-life.com/ing-insurance/life/ing-medical-plan.html
Great Eastern: (Limited Information)
http://www.lifeisgreat.com.my/lig4/newlig/products/products_health.htm
It’s very common that confusion arises whenever the topic of medical insurance is discussed. The average policyholders are usually not informed about what exactly their “medical insurance” benefits are until they actually visited the doctor. So, to avoid this from happening to you, I am going to clear up the air once and for all- what exactly is medical insurance and what coverages are you entitled to.
Medical insurance is a broad term to define any insurance coverage that allows you to claim medical compensation from the insurance company whenever you fulfil the conditions specified in the contract. Generally, a flu bout or a fever will not allow you to claim any compensation, and those claims usually falls under your own company’s medical benefit, if you have one.
Major insurance Companies offer the following medical insurance products:
Medical insurance is a broad term to define any insurance coverage that allows you to claim medical compensation from the insurance company whenever you fulfil the conditions specified in the contract. Generally, a flu bout or a fever will not allow you to claim any compensation, and those claims usually falls under your own company’s medical benefit, if you have one.
Major insurance Companies offer the following medical insurance products:
1) Medical & Hospitalisation Card
I have covered this benefit here: Malaysia Medical & Hospitalization Insurance Explained. To sum it up, this is a plan that works like a credit card. Say you sign up a package that gives you RM 300,000 lifetime limit, the limit will be deducted with every claims you make. However, this card only covers for the medical and hospitalisation expenses. It doesn’t cover any diagnosis of major illnesses.
2) Critical Illnesses
Now, this product is somewhat like a roulette with a choice of 36 terminal illnesses. Hit either one, and you will be “rewarded” with the total jackpot sum. Say if your critical illnesses policy has a coverage of RM 500,000, that’s the full ballpark amount you will be compensated the moment you are diagnosed with any of the 36 terminal illnesses. There’s no installments or deferred payments, you should get a cheque with the full amount of your coverage. If your critical illnesses policy is only assured up to RM 25,000, that’s too bad. Depending on the jackpot illness you hit, it’s barely going to be enough, but RM 25,000 is all you are going to get to get you through, if you get through at all :-P
With the “Medical Insurance” definition laid out, I hope you are no longer confused what medical insurance benefits you have. The two policies above are not the same, but you usually can buy them as a single package, which is very common with an investment-linked policy. You can also purchase them separately- one policy for the medical card benefit and another policy for critical illnesses coverage.
Okie, let’s move on to the critical illnesses coverage. In Malaysia, the critical illnesses coverage comes in 3 dozens- that’s 36 illnesses. I have no idea why is that so, but the internal surveys probably shows that most insurance agents can only memorize up to 36 illnesses.
So, what are these 36 critical illnesses? And what do they cover? To explain each and every 36 illnesses, I suggest you download this critical illnesses booklet I’ve compiled which is in the second edition at this point of writing, You would understand much more clearly what a critical illnesses policy can and cannot do for you.
Here? a quick run through on the existing 36 major critical illnesses protection offered by the insurance companies in Malaysia.
(1) Heart Attack
With the “Medical Insurance” definition laid out, I hope you are no longer confused what medical insurance benefits you have. The two policies above are not the same, but you usually can buy them as a single package, which is very common with an investment-linked policy. You can also purchase them separately- one policy for the medical card benefit and another policy for critical illnesses coverage.
Okie, let’s move on to the critical illnesses coverage. In Malaysia, the critical illnesses coverage comes in 3 dozens- that’s 36 illnesses. I have no idea why is that so, but the internal surveys probably shows that most insurance agents can only memorize up to 36 illnesses.
So, what are these 36 critical illnesses? And what do they cover? To explain each and every 36 illnesses, I suggest you download this critical illnesses booklet I’ve compiled which is in the second edition at this point of writing, You would understand much more clearly what a critical illnesses policy can and cannot do for you.
Here? a quick run through on the existing 36 major critical illnesses protection offered by the insurance companies in Malaysia.
(1) Heart Attack
(2) Stroke
(3) Coronary Artery Disease Requiring Surgery
(4) Cancer
(5) Kidney Failure
(6) Fulminant Viral Hepatitis
(7) Major Organ Transplant
(8) Paralysis /Paraplegia
(9) Multiple Sclerosis
(10) Primary Pulmonary Arterial Hypertension
(11) Blindness
(12) Heart Valve Replacement
(13) Loss of Hearing / Deafness
(14) Surgery to Aorta
(15) Loss of Speech
(16) Alzheimer’s Disease / Irreversible Organic Degenerative Brain Disorders
(17) Major Burns
(18) Coma
(19) Terminal Illness
(20) Motor Neurone Disease
(21) AIDS Due To Blood Transfusion
(22) Parkinson’s Disease
(23) Chronic Liver Disease
(24) Chronic Lung Disease
(25) Major Head Trauma
(26) Aplastic Anaemia
(27) Muscular Dystrophy
(28) Benign Brain Tumor
(29) Encephalitis
(30) Poliomyelitis
(31) Brain Surgery
(32) Bacterial Meningitis
(33) Other Serious Coronary Artery Disease
(34) Apallic Syndrome
(35) AIDS Cover of Medical Staff
(36) Full Blown AIDS
Quite a list, eh?
If you ask me, how much critical illnesses protection should you be covered with? Now, that? a very intelligent question, frankly because not many people has the answer. Of course, the insurance agent would like you to believe you should have the maximum coverage for the obviouss reasons (ka-ching!), which is close to about RM 1 million. RM 1 million is as much risk that an insurance company in Malaysia would take to protect a single individual.
Actually, my approach to that question is rather straightforward.
*****
Let? say God came into your dream tonight and convinced you that you are going down with one of the critical illness tomorrow.
Unfortunately after you woke up, you realized that God did not tell you which illnesses you are going to get, not a very good God, but at least He told you before hand, unlike your neighbor who had a stroke and went away just like that without a sen to claim from his insurance.
The next thing you did was to call up your insurance agent and told her to come into your house right away. While waiting for her, you continue to guess which illnesses God will strike you with today. You realized since there? no way you can find out, you might as well cover yourself with as much protection as you can.
Finally, your agent arrives, and after telling her your premonitions, she immediately ask you to sign on the critical illness insurance application form, at the same time checking to see if you? just went coo-coo (a contract signed with a non-sober person is not valid).
You deliberated for a while and asked quietly in your head, ?hat if God is playing a trick on me? If I used up all my money to top up my critical illness policy, and if it happens to be a trick God is playing with me, I would have no money to continue paying the policy next month!??
Once again, you are stuck in a dilemma and you finally decided that the best way is to top up as much as you can financially afford while not having to make too much a change in your family? existing lifestyle. Also, if God was serious, you have to make sure that your existing coverage would provide adequate fund for the following:
1) Expenses during your stay in the hospital.
2) 1-2 years expenses incurred by your household in the case of you not being able to work
3) Your boss is most likely going to give you “permanent leave”. How would that affect your existing cash flow, your loans and various other financial commitments.
4) Post-hospitalization treatment expenses.
Quite a list, eh?
If you ask me, how much critical illnesses protection should you be covered with? Now, that? a very intelligent question, frankly because not many people has the answer. Of course, the insurance agent would like you to believe you should have the maximum coverage for the obviouss reasons (ka-ching!), which is close to about RM 1 million. RM 1 million is as much risk that an insurance company in Malaysia would take to protect a single individual.
Actually, my approach to that question is rather straightforward.
*****
Let? say God came into your dream tonight and convinced you that you are going down with one of the critical illness tomorrow.
Unfortunately after you woke up, you realized that God did not tell you which illnesses you are going to get, not a very good God, but at least He told you before hand, unlike your neighbor who had a stroke and went away just like that without a sen to claim from his insurance.
The next thing you did was to call up your insurance agent and told her to come into your house right away. While waiting for her, you continue to guess which illnesses God will strike you with today. You realized since there? no way you can find out, you might as well cover yourself with as much protection as you can.
Finally, your agent arrives, and after telling her your premonitions, she immediately ask you to sign on the critical illness insurance application form, at the same time checking to see if you? just went coo-coo (a contract signed with a non-sober person is not valid).
You deliberated for a while and asked quietly in your head, ?hat if God is playing a trick on me? If I used up all my money to top up my critical illness policy, and if it happens to be a trick God is playing with me, I would have no money to continue paying the policy next month!??
Once again, you are stuck in a dilemma and you finally decided that the best way is to top up as much as you can financially afford while not having to make too much a change in your family? existing lifestyle. Also, if God was serious, you have to make sure that your existing coverage would provide adequate fund for the following:
1) Expenses during your stay in the hospital.
2) 1-2 years expenses incurred by your household in the case of you not being able to work
3) Your boss is most likely going to give you “permanent leave”. How would that affect your existing cash flow, your loans and various other financial commitments.
4) Post-hospitalization treatment expenses.
Don? expect to be able to jump around and start kicking ass the minute you are out of the hospital. It’s not called CRITICAL illness for no reason. Chances are your post-hospitalization expenses might be as costly as your hospital bills.
Finally, after much deliberation, you topped up your critical illness policy to an amount you are comfortable with- one that can take care of your illnesses and family expenses (if God was serious), and one that wouldn? tax you to the point you have to downgrade your lifestyle too much (if God was just kidding).
After all, you realized, with adequate critical illness coverage, you get better sleep at night, and even if God was kidding, your critical illness policy would still amount to quite a bit of savings when you decided to terminate it many years later.
*****
So, with that, I hope I have ?nswered?? the question on how much you should be covered. As you can see from the story illustrated above, everyone? critical illness protection is different. Although treatments for a few of the major illnesses requires up to RM 150,000, it can sometimes be very difficult for a fresh graduate with salary barely above RM 1,500 to afford such a high protection.
However, all hope is not lost. One can always choose to upgrade their critical illnesses policy from time to time to balance it with their existing commitments. Although most of us don? dream of God telling us about when we are getting a stroke or a heart attack, statistics published by the government, healthcare industry and insurance industry is quite enough to tell us that critical illnesses do not discriminate.
Most critical illnesses strikes at the most inopportune time, and it? really up to you how you want to play this game of probability. My advice is, other than having an adequate critical illnesses fund, one should always keep a healthy lifestyle, you know, the standard drill the doctor always tell you- eat more fruits, drink more water, smoke less, drink less, exercise more?在la?在la??/p>
Next, I am going to cover on Endowment Plans, where we’ll look at how insurance can be used to protect and plan for your future savings.
After all, you realized, with adequate critical illness coverage, you get better sleep at night, and even if God was kidding, your critical illness policy would still amount to quite a bit of savings when you decided to terminate it many years later.
*****
So, with that, I hope I have ?nswered?? the question on how much you should be covered. As you can see from the story illustrated above, everyone? critical illness protection is different. Although treatments for a few of the major illnesses requires up to RM 150,000, it can sometimes be very difficult for a fresh graduate with salary barely above RM 1,500 to afford such a high protection.
However, all hope is not lost. One can always choose to upgrade their critical illnesses policy from time to time to balance it with their existing commitments. Although most of us don? dream of God telling us about when we are getting a stroke or a heart attack, statistics published by the government, healthcare industry and insurance industry is quite enough to tell us that critical illnesses do not discriminate.
Most critical illnesses strikes at the most inopportune time, and it? really up to you how you want to play this game of probability. My advice is, other than having an adequate critical illnesses fund, one should always keep a healthy lifestyle, you know, the standard drill the doctor always tell you- eat more fruits, drink more water, smoke less, drink less, exercise more?在la?在la??/p>
Next, I am going to cover on Endowment Plans, where we’ll look at how insurance can be used to protect and plan for your future savings.
An endowment insurance policy is structured more like a savings account than an insurance policy and to help us easily understand the endowment policy, we can basically dissect the endowment policy into 2 main components- Savings and Insurance.
What’s an Endowment Policy and How does it Works?
(1) The Savings Component
What’s an Endowment Policy and How does it Works?
(1) The Savings Component
For most endowment policies in the market, you can opt to save for a period of 12 years, 15 years, 18 years, 21 years, 24 years, 27 years or 30 years. For instance, if you choose a 21-year endowment policy, your savings will mature 21 years later and the policy will be considered void. At the end of the 21 year period, you shall receive a big fat cheque from the Insurance Company.
Most endowment policies allows you to make regular withdrawal, which is usually every 3 years once. Like any whole-life policies, you can also apply for policy loan. Regular withdrawal can affect the outcome of your savings, since every withdrawal you made will reduce the total cash amount in the policy.
(2) The Insurance Component
Most endowment policies allows you to make regular withdrawal, which is usually every 3 years once. Like any whole-life policies, you can also apply for policy loan. Regular withdrawal can affect the outcome of your savings, since every withdrawal you made will reduce the total cash amount in the policy.
(2) The Insurance Component
The insurance component is also pretty straighforward. In the event of a Death or Total Permanent Disability (TPD), you will be paid the Insured Amount. However, if you are diagnosed with Critical Illness, the premium of the endowment policy will continue to be paid by the Insurance Company, of course, until you kick the bucket.
In the case of the father setting up the endowment policy for his kid, the insurance component would work slightly differently. If the kid kicks the bucket first or suffer from TPD, the same thing applies- the Insured Amount stated in the Endowment Policy will be paid out, in this case, to the father. If child is diagnosed with Critial Illness, the Company will continue to sponsor the policy. Let’s say if the Father kicked the bucket first, suffer from TPD or diagnosed with Critical Illness, the Company will sponsor the kid until the policy matures.
For the scenarios shown above, you should refer to the Insurance Companies’ respective riders that is attachable to the endowment policy and understand the terms and conditions to fully take advantage of the policy.
Why an Endowment Policy?
So, after going through the mechanics of how an endowment plan works, what’s the purpose of getting one?
An endowment policy works great as a passive retirement fund. Since the policy does not actively invest in shares and equities, the returns from an endowment policy is somewhat predictable. For business owners who doesn’t contribute to KWSP, the endowment plan is a great substitute.
An endowment policy is also usually used to structure a child’s education fund, since it gives basic protection to the kid and most importantly, the policy allows waiver of premium should anything happens to the Payor.
Also, you can use an endowment plan to distribute your estate or to setup a trust fund. Compared to tangible assets like properties or jewelleries, the endowment plan is much more transparent and hassle-free.
In the case of the father setting up the endowment policy for his kid, the insurance component would work slightly differently. If the kid kicks the bucket first or suffer from TPD, the same thing applies- the Insured Amount stated in the Endowment Policy will be paid out, in this case, to the father. If child is diagnosed with Critial Illness, the Company will continue to sponsor the policy. Let’s say if the Father kicked the bucket first, suffer from TPD or diagnosed with Critical Illness, the Company will sponsor the kid until the policy matures.
For the scenarios shown above, you should refer to the Insurance Companies’ respective riders that is attachable to the endowment policy and understand the terms and conditions to fully take advantage of the policy.
Why an Endowment Policy?
So, after going through the mechanics of how an endowment plan works, what’s the purpose of getting one?
An endowment policy works great as a passive retirement fund. Since the policy does not actively invest in shares and equities, the returns from an endowment policy is somewhat predictable. For business owners who doesn’t contribute to KWSP, the endowment plan is a great substitute.
An endowment policy is also usually used to structure a child’s education fund, since it gives basic protection to the kid and most importantly, the policy allows waiver of premium should anything happens to the Payor.
Also, you can use an endowment plan to distribute your estate or to setup a trust fund. Compared to tangible assets like properties or jewelleries, the endowment plan is much more transparent and hassle-free.
Create Now Save Later or Save Now Create Later?The underlying concept of an endowment policy is to create now and save later. This basically means that the moment you start an endowment policy, the amount of wealth is created on the first day itself. Say if you are thinking of saving RM 300,000 for 30 years, the endowment policy would create the RM 300,000 in paper value. If any misfortunate incident (either through Death, TPD or Critical Illness) should stop your contribution to this policy, the RM 300,000 will be paid out. That’s the “Create Now” phase. Hence, “Save Later” means you have the option of contributing to the policy regularly.
A typical example of “Save Now and Create Later” strategy is a normal savings account, whereby contributions is made now and the results is seen years later. You don’t get compensated if anything goes wrong in the wealth creation journey, since there’s no insurance componenet involved.
The DownsideNothing good comes without drawbacks. An endowment policy should be setup with the appropriate contribution amount. Unlike a savings account, you are unlikely to be refunded in full if you decide to terminate the policy in the first 10 to 15 years of the policy.
Unlike an investment funds, the endowment policy lacks liquidity and aggressiveness. This means you should not expect double digit annual returns from your endowment policy.
And that wraps up the Endowment Insurance for this section. If you have any questions, do post it in the comments below.
In the next section, I am going to be covering on Whole-life Insurance.
A typical example of “Save Now and Create Later” strategy is a normal savings account, whereby contributions is made now and the results is seen years later. You don’t get compensated if anything goes wrong in the wealth creation journey, since there’s no insurance componenet involved.
The DownsideNothing good comes without drawbacks. An endowment policy should be setup with the appropriate contribution amount. Unlike a savings account, you are unlikely to be refunded in full if you decide to terminate the policy in the first 10 to 15 years of the policy.
Unlike an investment funds, the endowment policy lacks liquidity and aggressiveness. This means you should not expect double digit annual returns from your endowment policy.
And that wraps up the Endowment Insurance for this section. If you have any questions, do post it in the comments below.
In the next section, I am going to be covering on Whole-life Insurance.
5) Whole-life Insurance.
Whole-life insurance is fairly self-explanatory. It? basically an insurance contract that goes on almost forever! Well, at least until the day you have to claim from it.
Let? look at what it insurance can do for you.
First, it gives you death coverage, either accidental or non-accidental. As long as you have drawn your last breathe, you have fulfilled the conditions and your beneficiaries are eligible to claim from the whole-life insurance policy? proceeds. You can even claim if you committed suicide, but make sure your policy has been running for at least one calendar year.
Second, a whole-life policy also comes with TPD. Disability benefits are mentioned in the previous section on Personal Accident.
I shall outline the term TPD here once more:
(a) becomes total and permanent and such that the Life Assured is incapable of ever engaging in any work, occupation or profession in the future to earn or obtain any wages, remuneration or profit; or
(b) is deemed to be caused by any of the following:(i) total and irrecoverable loss of sight of both eyes; or(ii) loss of use of two limbs at or above the wrist or ankle; or(iii) total and irrecoverable loss of sight of one eye and loss of use of one limb at or above the wrist or ankle.
(c) Or by being unable to fulfill any 3 of the following activities:-i) Transferii) Mobilityiii) Continenceiv) Dressingv) Bathing/Washingvi) Eating.
Also, a whole-life policy allows you to attach various riders, such as Critical Illness, female illness-related, accident, waiver of premium, payor benefit and many more.
Most of the conventional non-investment-linked Critical Illness policies in Malaysia are also packaged as whole-life policies.
A whole-life insurance policy is usually a participating policy. This basically means that the premium you pay will be pooled in a fund together with all other policyholders. The insurance company will then invest the fund and any returns made from such investment will be redistributed to the policyholders in the form of cash bonuses. However, unlike investment-linked policy, most whole-life insurance policies do not invest in the equity market.
Therefore the risk you take is very minimal and hence, the return you get from a whole-life insurance policy is considerably less compared to an investment-linked policy. In a whole-life policy, the Company must pay a guaranteed sum, even if it makes a loss in its investment strategy. So, one way or another, your money is not going to vanish into thin air as long as the insurance company stays solvent.
This is why I strongly suggest that you check on the solvency and liquidity of insurance company before taking out an insurance policy. The latest insurance company annual report is available from the Bank Negara Malaysia? website at www.bnm.gov.my. A concise version of the figurative report is included at the end of this guide for your reference.
Term PoliciesTerm insurance policies are very much like whole-life policies. A term policy basically provides death benefits and optional TPD benefits, without the profits or cash value portion. This means 100% of your premium is used to pay for the insurance charges with no allocation for investment. This is also known as a non-participating insurance policy, which means that the insurance premium paid by the policyholder does not participate in any investment or income-generating activities.
If your budget is tight and you are looking for a short-term risk management tool, this could be one way to fund your strategy.
Also, while we are on this topic, I would like to touch on a sensitive subject, especially if you voice your concern to your trusted insurance agent on the return on investment??of your insurance policies. Some insurance agents want you to believe that cash bonuses gained from your insurance policies are one of the best things you can get from your life insurance policy.
However, I would prefer to look at the income-generating portion of whole-life policies as a method of financing your insurance charges, rather than as an avenue to accumulate wealth. In fact, it? not a very effective way to generate wealth. So, it would be an unrealistic objective if you actually try to make money out of your whole-life insurance policies or, for that matter, any insurance policies.
Always remember this: ?n insurance policy is and always will be a risk management tool.??
Let? look at what it insurance can do for you.
First, it gives you death coverage, either accidental or non-accidental. As long as you have drawn your last breathe, you have fulfilled the conditions and your beneficiaries are eligible to claim from the whole-life insurance policy? proceeds. You can even claim if you committed suicide, but make sure your policy has been running for at least one calendar year.
Second, a whole-life policy also comes with TPD. Disability benefits are mentioned in the previous section on Personal Accident.
I shall outline the term TPD here once more:
(a) becomes total and permanent and such that the Life Assured is incapable of ever engaging in any work, occupation or profession in the future to earn or obtain any wages, remuneration or profit; or
(b) is deemed to be caused by any of the following:(i) total and irrecoverable loss of sight of both eyes; or(ii) loss of use of two limbs at or above the wrist or ankle; or(iii) total and irrecoverable loss of sight of one eye and loss of use of one limb at or above the wrist or ankle.
(c) Or by being unable to fulfill any 3 of the following activities:-i) Transferii) Mobilityiii) Continenceiv) Dressingv) Bathing/Washingvi) Eating.
Also, a whole-life policy allows you to attach various riders, such as Critical Illness, female illness-related, accident, waiver of premium, payor benefit and many more.
Most of the conventional non-investment-linked Critical Illness policies in Malaysia are also packaged as whole-life policies.
A whole-life insurance policy is usually a participating policy. This basically means that the premium you pay will be pooled in a fund together with all other policyholders. The insurance company will then invest the fund and any returns made from such investment will be redistributed to the policyholders in the form of cash bonuses. However, unlike investment-linked policy, most whole-life insurance policies do not invest in the equity market.
Therefore the risk you take is very minimal and hence, the return you get from a whole-life insurance policy is considerably less compared to an investment-linked policy. In a whole-life policy, the Company must pay a guaranteed sum, even if it makes a loss in its investment strategy. So, one way or another, your money is not going to vanish into thin air as long as the insurance company stays solvent.
This is why I strongly suggest that you check on the solvency and liquidity of insurance company before taking out an insurance policy. The latest insurance company annual report is available from the Bank Negara Malaysia? website at www.bnm.gov.my. A concise version of the figurative report is included at the end of this guide for your reference.
Term PoliciesTerm insurance policies are very much like whole-life policies. A term policy basically provides death benefits and optional TPD benefits, without the profits or cash value portion. This means 100% of your premium is used to pay for the insurance charges with no allocation for investment. This is also known as a non-participating insurance policy, which means that the insurance premium paid by the policyholder does not participate in any investment or income-generating activities.
If your budget is tight and you are looking for a short-term risk management tool, this could be one way to fund your strategy.
Also, while we are on this topic, I would like to touch on a sensitive subject, especially if you voice your concern to your trusted insurance agent on the return on investment??of your insurance policies. Some insurance agents want you to believe that cash bonuses gained from your insurance policies are one of the best things you can get from your life insurance policy.
However, I would prefer to look at the income-generating portion of whole-life policies as a method of financing your insurance charges, rather than as an avenue to accumulate wealth. In fact, it? not a very effective way to generate wealth. So, it would be an unrealistic objective if you actually try to make money out of your whole-life insurance policies or, for that matter, any insurance policies.
Always remember this: ?n insurance policy is and always will be a risk management tool.??
6) Investment Link Policy (ILP)
That why it is important that one understand the nature of an investment-linked policy before signing on the dotted line. An investment-linked that is tied with many features and is financed with minimal premium is not meant for investment or savings purposes since most of the premium paid by the policyholder will be used up to pay for the insurance charges. Its core function is for protection only. If you are looking for investment return from your investment-linked policy, consult your insurance adviser on how you should allocate your premium.
Ensure that you are not being taken for a ride with the low premium high protection concept! Traditional insurance policies are the only GUARANTEED REGULAR premium insurance products. The premium and insurance charges has been calculated and averaged throughout the entire policy life. This is the reason why traditional policies are slightly pricier than their investment-linked counterparts.
Ensure that you are not being taken for a ride with the low premium high protection concept! Traditional insurance policies are the only GUARANTEED REGULAR premium insurance products. The premium and insurance charges has been calculated and averaged throughout the entire policy life. This is the reason why traditional policies are slightly pricier than their investment-linked counterparts.
A better risk management strategy would be to ensure that you also have traditional policies covering your life alongside the investment-linked policy. An ILP should be used mainly for your medical card coverage.
What about those who found out that they can afford the sudden hike of insurance charges and decided to start a traditional policy? Definitely not a very good idea especially if you realized this problem when you are about to retire (55 years old and above). The premium for any insurance products at that age will be prohibitive.
And that is that. I am going to wrap up the entire series on Investment-linked Policy with the following advice:
There is no way you can get high protection with low premium, at least not for long. Ensure that your consultant give you the whole picture of the policy terms, including insurance charges and risk profile of the fund. If the plan is too good to be true, it probably is. Remember, there is no free lunch!