Bankruptcy And Life Insurance

There is this a misconception amongst a majority section of our Malaysian population that a Bankrupt (Malaysian) is not allowed to have a bank account and is not eligible to purchase life insurance. Please allow me the opportunity to clarify.

A Bankrupt can be insured in a smart process that is legal and effective.

Personal Savings Account
A Bankrupt is eligible to a personal saving account with a commercial bank in Malaysia. This personal saving account will enable a Bankrupt to conduct day to day banking transaction. For example, an employer may transfer monthly salary to a personal saving account. Therefore a personal saving account is a necessity for a Bankrupt.

Purchasing Life Insurance
A Bankrupt may not pays for the life insurance premium on his/her own life or on others life. However, a third party with insurable interest on the Bankrupt may purchase a life insurance policy on the life of the Bankrupt and pays for the premium. The Third party is the "Owner" of the policy and the Bankrupt is the "Insured".

A third party with insurable interest on the life of the bankrupt may be:-
1: Spouse of a Bankrupt
2: Children of a Bankrupt
3: Employer of a Bankrupt
4: Creditor of a Bankrupt
  
Nominee of the Life Insurance Policy
The Owner of the policy may appoint a Nominee (Beneficiary) to the policy. The Nominee can be the spouse of the Insured, Children or Parent (if the insured is unmarried). In cases where housing loan is concern, the creditor (Bank) could be the Nominee of the policy. Or the employer could be appointed as a Nominee in a group insurance policy.

Creditor Proof
Life insurance proceed (sum assured) paid on the policy is creditor proof. This means that no creditor will have access to the proceed (sum assured) of the life insurance policy.

Type of Policy
Most life insurance policy offering typical death and disability is suitable to meet a Bankrupt need. However, living benefits is extremely important to a Bankrupt's needs where instant cash is crucial. Living benefits under life insurance extended plans that are typically offered as supplementary contract to the basic life insurance plan. For example:-
1: Accidental Protection
2: Disability Income
3: Medical Insurance
4: Crisis Cover or Critical Illnesses