101 For Life Insurance

How does one even begin the process of buying insurance? How do you choose the best insurance policy? Here are 25 considerations before you take the plunge:

1. Are you already covered by your employer? If it’s sufficient, you probably don’t need additional insurance coverage.
2. If the coverage is very basic, you need additional insurance coverage.
3. Decide which you need – life insurance, personal accident (PA) insurance, medical card, critical illness.
4. If you are a single, working professional, you should get insurance coverage for life’s nasty turn of events i.e. sudden hospitalisation due to accidents, and illnesses.
5. A standalone medical card will cover the cost of hospitalisation without upfront payment.
6. PA coverage meanwhile will benefit your next of kin in the event of death or disability due to an accident.
7. Think about Critical Illness protection too that covers 36 health problems.
8. If you have a family who are financially dependent on you, consider a life insurance policy.
9. Remember that while Muslims are limited to only Takaful products, non-Muslims have other options.
10. Insurance providers are aplenty in Malaysia – Prudential, AIA, Allianz, Manulife, Zurich, Great Eastern, Berjaya, Tokio Marine. Also some banks like Maybank.
11. Buy only from a well-known company, with a dedicated phone line for inquiries and claims.
12. Understand the difference between investment-linked and non-investment linked products.
13. Investment-linked products cost more. If you pick this insurance policy, you contribute a few hundred ringgit a month to an investment, usually a long-term unit trust. The investment may or may not give you a decent profit, but usually you are assured to get back at least the money deposited by the end of the term. During the entire period, you enjoy insurance coverage.
14. Non-investment linked products give you coverage for a lesser monthly cost, but you won’t get the money back at all.
15. Discuss with your agent exactly what you want and the options available. For example, some people are concerned about being a financial burden to their families in the event they are diagnosed with a critical illness, die or are disabled. You may also not want to worry about hospitalisation costs paid upfront.
16. Be prepared to answer questions about your age, whether you smoke, your marital status, employment and such.
17. Your agent will enter all this information into a software programme that will automatically calculate the cost of your monthly premium.
18. If you feel the hospitalisation benefit is a bit on the low side (say if you want RM200 per day instead of RM100 as a cash benefit), your agent can tweak this figure for you and the software will give a new quotation.
19. Then there’s the issue of “riders”. Riders are add-ons to the insurance policy, for better protection/additional coverage.
20. You will soon realise that some insurance plans are very complicated. Some offer an all-in-one Medical Card + Investment + PA + TPD + Critical Illness. How much? RM6,700 per year? That’s more than RM500 per month – so select the plan carefully.
21. Take for instance a standalone medical card from your selected insurance provider. It may cost only RM120 per month but this card can be used when you’re admitted to hospital. You can get admitted to a number of private, well-known hospitals nationwide. You will enjoy a high annual and lifetime limit (this is good if you suddenly require a major and costly operation, pre- and post-care, home nursing, guardian allowance, overseas coverage and reasonable room and board coverage).
22. Bear in mind that there is no “payout” for death or permanent disability, and no cashback incentive for no-claims.
23. If you require PA insurance, it’s a lot easier to get than a medical card – just apply online. Click click click, submit. One of the sales assistants will call to confirm auto-payments via credit card and you’re officially covered.
24. There are many to choose from, so go through these carefully. Takaful PA insurance products can be female-specific i.e. cover female-related illnesses and snatch theft. Some will also pay off selected outstanding debt.
25. Ask yourself some important questions: Are these policies enough? Are you over or under-insured? What is your coverage? Have you identified your family as beneficiaries to the insurance money?

Important facts

• Many agents will push for investment-linked insurance. Stand your ground if you absolutely do not want these.
• If you’re buying insurance for the first time, bear in mind that some insurance products are “set meals” while some are “ala-carte”. Every insurance provider has different set meal combos, sometimes combining all (Life insurance + Critical Illness + PA + Investment). They also have “side dishes” (additional riders).
• Agents must have licenses.
• Insurance premiums can be auto-deducted monthly with credit cards. Good, you can earn points.
• Certain websites can help you compare insurance policies available in the market, but even these can be too confusing to be useful.
• You can definitely buy PA insurance without agents. This is called the direct distribution channel: Insurance provider direct to you, without intermediary. However, it is advisable to contact an agent because (i) they offer more products, (ii) they can explain terminology in layman’s terms, and (iii) they’re just trying to make an honest living, too.
• Bank Negara Malaysia recently released a concept paper about direct distribution channels for “Pure Protection Products”. We should expect the availability of more insurance products online in the future
• The premium for non-investment linked products will increase as you age. If you don’t like this, pick an investment-linked product.

Life Engineering, a medical cost crowdsharing platform, and the first of its kind in Malaysia, is an alternative to medical insurance.

Under this method, you’re basically pooling your money together and if one of you falls sick, you can have your medical costs covered. Here’s how it works:

1. Sharers (members) share inpatient hospitalisation costs of the community.
2. Sharers share the actual medical costs incurred. Pay RM0 if no one falls sick in the month. RM50 maximum a month.
3. A sharer can put forth up to RM1 million in medical costs for sharing in the first year of joining. Additional RM200,000 limit for each subsequent year.
4. RM5,000 bereavement payment in the event of untimely death, and an additional RM1,000 for every subsequent year.
5. More than 200 panel hospitals in Malaysia – 135 government hospitals, 86 private hospitals.
6. Life Engineering pays for hospitalisation first, only then crowd shares.

This article first appeared in ringgitohringgit.com