Extension - Relief For Policyholders

The Life Insurance Association of Malaysia (Liam) and its member companies have extended additional relief measures for affected policyholders to Dec 31, 2020 following the third wave of the Covid-19 pandemic in the country.

The additional relief measures come in a form of financial assistance amongst others include cash benefits, hospitalisation allowance and lump-sum death/compassionate benefits.

Examples of the additional benefits offered by the life insurers are:

i. An insurer offers products which entitled policyholders to enjoy six months premium relief of up to RM3,000 due to retrenchment (policy to be in force at least 12 months prior to retrenchment).

ii. Six life insurers have pledged RM1 million each as part of their financial assistance and support programme for customers affected by Covid-19.

iii. Four life insurers offer special death benefit payment ranging from RM5,000 - RM15,000 to frontline medical workers.

iv. Cash relief ranging from RM1,000 – RM5,000 for customers who are diagnosed with Covid-19.

v. Cash benefits/allowance for hospitalisation ranging from RM60 - RM250 per day and up to 30 days of hospitalisation.

vi. Special lump-sum death/compassionate benefits ranging from RM5,000 - RM20,000 upon the death of the insured.

In support of the government’s measures to assist the rakyat in coping with the pandemic, Liam and its member companies have come together in solidarity to implement various relief measures to assist policyholders who are affected by the pandemic and to ensure that they are able to continue with their livelihoods.

Liam and MTA have also granted a 90 days deferment period/no-lapse guarantee for three months for policyholders who are impacted by this pandemic. During this period, insurance and takaful companies will continue to provide insurance protection to affected policyholders if they are not able to pay for their premiums. Affected policyholders must apply to their insurance companies to get approval before they can benefit from this relief measure. This option is available from April 1, 2020 until Dec 31, 2020.

Policyholders who are qualified for this relief include those who are Covid-19 positive patients, those who are home quarantined (mandatory) or suffered a loss of income.

Insurers also extend to small and medium enterprises (SMEs) which have suffered a loss of income due to the Covid-19 pandemic. Examples of events that lead to such loss of income include retrenchment, shorter working hours and salary or commission reductions for individuals; and loss of business income for self-employed and SMEs.

Policyholders affected by Covid-19 need to submit their applications to their insurance company for the deferment of payment of life insurance premiums. As of to date, over one million policyholders have been granted the premium deferment relief, involving a total of over RM1.6 billion premium payment.

Insurance companies will continue to provide other forms of support to help policyholders to keep their policies in force. Some of these may include a restructuring of policy features, such a lowering the sum assured or temporarily shortening the policy duration, so that policyholders can keep their insurance protection.

32% - RM1,000 Or Less - EPF Account 1

Approximately 32% of Employees Provident Fund contributors (EPF) have a balance of around RM1,000 in their Account 1. 10% have a balance of around RM5,000 and below in their Account 1 (42% of contributors have around RM5,000 or less in their Account 1).

The government is allowing those who have lost their jobs during the pandemic to make targeted withdrawals of RM500 a month for a maximum of 12 months from their Account 1 from January.

Personal income tax rate for those earning between RM50,000 and RM70,000 a year by 1%. In addition, EPF contributions will be reduced from 11% to 9%.

Insurance - Financial Planning

Traditionally, most people associate insurance plans with the idea of debt settlement and to pay-off their credit liabilities including mortgage or medicals bills. However, through proper financial planning, insurance plans can also be used as tools for the purpose of wealth diversification, distribution and protection.

Diversify - By having the right protection plan, no matter what stage of life you are in, or what you do for a living, insurance can help you along the way to achieve your financial goals and objectives. So, you should consider a plan that suits your needs. For instance, one that can help you achieve your desired investment returns through diversification. 

Many have always used insurance as a smarter way for wealth management. They often treat it as a little, set-aside emergency fund which they can access at any time, without taxes or penalty.

However, a properly-planned life insurance policy is more than helping policyholders to save up on taxes. It often has other decent features such as life coverage, guaranteed cash payments, maturity benefits or other protection benefits. 

Moreover, these plans provide policyholders with immediate income benefits even in their first year. The incomes may gradually increase every year, depending on the insurance policy. These plans can help you to grow your wealth regardless of market conditions while providing you with life protection. 

If growing your wealth in a safer way is your priority, you can consider an insurance plan with an endowment or investment features. Such an insurance plan helps policyholders to generate fixed maturity returns while providing guaranteed benefits such as life coverage or other insurance benefits. A portion of the premium you pay goes towards providing you with insurance protection while the rest of it is invested into a portfolio of selected funds that are well diversified. 

Some might want to consider investment-linked protection plan as they are quite flexible. Since a portion of your premium goes into an investment-linked fund, you can adjust your investments strategy and asset class via switching the sub-finds when you change your financial goals at some point in time. You can also adjust your insurance coverage as your needs change over the years. 

Preserve - As we are all aware of, we are entering into an environment where the interest rates are at their lowest since the financial crisis in the late 90s. If you are thinking of putting your hard-earned money into traditional deposit tools such as savings accounts and fixed deposits, it is no longer an attractive option as they do not offer better returns or other benefits. Many are considering diversifying their wealth into other available options in the bank which offer guaranteed benefits or additional advantages. 

An insurance plan is one of those options.  By saving with an insurance plan, the value of your wealth is preserved because you have just done what investment gurus have always advised – diversify and preserve! As the saying goes, “Don’t put all your eggs into one basket”. To better manage our risk and portfolio, we should always diversify our wealth into various financial tools, such as savings account, fixed deposit, investments- unit trust, foreign currency or shares, and of course, a suitable insurance plan. These financial tools will be generating different rates of return, depending on the degree of risk and offer you different level of flexibility in managing them. Managing all your wealth with the same financial tool is like putting all eggs into the same basket- once you drop it, you break them all.

Purchasing an insurance plan is also a more flexible option as you can decide if you want to pay a monthly premium, a pre-determined amount upfront annually or even a one-off payment in advance. Whichever is your preferred method, you have just practiced self-discipline by contributing towards your wealth planning through diversification and preservation. 

The value of the policy and benefits can be decided based on your financial needs and types of contribution. For example, you can choose the tenure and nature of the insurance plan based on your financial goals, such as preparation for retirement, setting up an income replacement upon the demise of the breadwinner or setting up a fund for your child’s education. 

On top of that, the government has also introduced tax incentives for those who purchase life insurance! Saving with life insurance just gets better as premiums are tax-deductible. For 2020 tax filings, the tax-relief for life insurance is RM7,000, while for medical or education policy, the tax-relief amount is RM3,000 per annum.

Distribute - Insurance plans serve as an essential part of solid financial planning. It provides you and your family with financial protection in case of sickness or death. It also gives you peace of mind, knowing that your loved ones will be taken care of no matter what might happen. 

With a solid insurance plan as part of your investment portfolio with your bank, your nominee(s) will receive your insurance payout according to your wishes, in the shortest possible time. This will enable them to continue their daily lives while also allowing a smoother estate transfer to ensure his or her family’s lifestyle is secured.

RHB life protection plans offer a wide range of products to suit all your different needs. Diversify your liquid cash into an insurance plan that can offer guaranteed benefits such as a large protection amount, cash payments, maturity benefits and investment returns. This is favourable compared to just a normal will or trust that will just preserve your wealth instead of growing it. Not forgetting, with insurance nomination, the claims amount can be paid to the nominated person faster as compared to the normal distribution act or will distribution process which may potentially take months or even years. 

LIAM Proposing Increase Tax Relief For Life Insurance

The Life Insurance Association of Malaysia (LIAM) is proposing that the government increase the current limit of RM3,000 tax relief for life insurance (LI) premium to RM5,000 in the upcoming Budget 2021, which is a way to encourage Malaysians to plan for their needs for protection.

The increase in tax relief would put more money back into the rakyat’s pocket to relieve them of their financial burden and also to encourage them to have a better financial plan for the future. The current combined tax relief of RM3,000 for MEI premiums is actually insufficient in most circumstances.

For example, the cost of medical insurance itself for an average family (two adults and three children) is around RM2,500 per annum at the lower end, where this leaves only about RM500 per annum premium for savings towards the education of three children in this typical family.

In addition, LIAM hopes the government would allow Employees Provident Fund (EPF) members to utilise the EPF Account 2 to purchase LI, as well as medical and health insurance in order to provide better long-term protection and security to the fund’s contributors.

Life insurance provides financial coverage for the family in the event of a death or illness of the family breadwinner. By allowing members to purchase life insurance from Account 2, it will help the members to augment their EPF savings to provide for themselves and their family in times of need.

LIAM is also proposing the extension of insurance coverage to the bottom 40% (B40) household income group through the government’s Perlindungan Tenang initiative by providing a one-to-one subsidy for the premiums paid by this group. This would provide an opportunity for the B40 group to appreciate the importance of life insurance protection, particularly if the insured member or family receives a claim, and to continue with the insurance after the two-year period.

Lastly, LIAM is proposing a waiver to the service tax for group insurance schemes by encouraging higher take-up rates by the employers for the benefit of their employees.

Under the existing tax regime, the premiums for group insurance schemes are subject to the service tax of 6%, thus making it costlier in premiums which might not be affordable for some employers, especially the small and medium enterprises. By having more Malaysians covered under private group medical insurance, this will help to lessen the burden of the public healthcare system, from both financial and capacity angles.

Main Objective Of Buying Life Insurance

Purchasing life insurance is a critical decision and is not to be taken lightly. If you’re considering life insurance to protect your family if you die or as a savings vehicle for retirement, it’s essential to compare your options. As you do your research, you should consider the benefits of life insurance and investigate any disadvantages of each life insurance policy you explore. In this article, we’ve broken down some of the best things about life insurance, as well as what you should look out for when deciding which policy is best for you.

Benefits of Life Insurance - Life insurance is often the foundation of a financial plan. Depending on the type of policy, the benefits of life insurance can last long after someone dies. Here are a few of the many benefits of having life insurance.

Family Protection - The most popular benefit of having life insurance is the death benefit. If someone dies while they have a life insurance policy in effect, the insurance company will pay a death benefit to the insured’s beneficiary. A policyholder typically decides how much insurance coverage they need when applying for a policy. This amount of coverage can differ from person to person. However, individuals usually select amounts based on what they want to leave behind and cover a set amount of income to support their dependents.

Budget Friendly - There are many life insurance types, and each type is designed to fit a different set of needs. Term life insurance only covers a person for a set amount of time, typically five years or more. Due to the lack of permanence, term life insurance policies tend to be the least expensive option on the market. If you want your life insurance to last your whole life or want to have flexibility in your premium payment cost, the cost of a policy will increase. Additionally, some companies will charge more for similar policies, so you might want to shop around to see if you can get the best price. But overall, no matter what your budget is, there is generally a policy to fit your needs.

Peace of Mind - It can be challenging to accrue wealth, especially when you’re young. You may want to protect your family financially in case you die unexpectedly, and your income disappears. Life insurance offers people peace of mind that their families will be financially stable, even if they’re no longer around to support their financial needs.

Tax Benefits - Usually, death benefits from employer-sponsored life insurance plans or private life insurance policies are tax-free. Additionally, the cash value in a whole life insurance accumulates tax-deferred growth. This means that a person can reinvest the money in the cash value of a life insurance policy without facing tax implications. The policyholder will not pay capital gains on any dividends or growth on the cash value. But there are a few situations where life insurance may have some tax implications. You may want to speak to a financial advisor to understand the tax implication of your policy.

Financial Planning - As part of a robust financial plan, some use life insurance to cover financial expenses such as medical bills, debt or funeral expenses. By using life insurance in this way, your family can avoid spending your savings that were intended for other uses. Additionally, the cash value component of permanent life can help you save for retirement. Depending on the type of policy you have, the cash value can grow tax-deferred and be reinvested. Some policies also prevent the cash value from declining with the market if there is a downturn. Additionally, people can choose to use the cash value during their lifetimes, making it a crucial part of some people’s retirement plans.

Disadvantages of Life Insurance - While life insurance is generally an investment worth considering, you should consider the drawbacks before choosing to purchase a policy. 

Sales Commissions - It is not advised to purchase a life insurance policy on your own. However, this leaves consumers open to insurance agents that might not have your best interests in mind. They may lead you toward a more comprehensive policy that you do not need or make recommendations that ensure they receive a larger commission. Therefore, be sure to do plenty of research before applying for a life insurance policy and not sign anything that you are not comfortable with.

Expense - The cost of life insurance increases as people age, and people in poor health often find it challenging to get a reasonable rate or qualify at all. Therefore, it is good to purchase life insurance when you’re young and healthy, since these factors determine the cost of your policy. If you are trying to get the best rates on a life insurance policy, you may want to improve your health. The life insurance medical exam will evaluate a person’s smoking status, blood pressure and more. People trying to get a favorable rate on their life insurance may want to quit smoking and improve their fitness before applying for life insurance.

Weak Investment Returns - The cash value portion of a life insurance policy is generally a safe investment vehicle. However, it may not see the same rate of return that an IRA or other investment might provide.  Compared to stocks, for example, the investment portion of cash value life insurance makes pretty paltry returns. Sould you make more if you invested the money elsewhere? Likely yes — unless you are an extremely conservative investor. Therefore, most people choose to fully fund their EPF and other assets before funding the cash value in their life insurance policies.

Permanent Life Insurance Costly - As mentioned before, there is a life insurance option for almost any budget. Term life insurance is typically the least expensive, but permanent insurance, or whole life insurance, is costly no matter a person’s age or health. It is pricier because it lasts a person’s entire life. Therefore, there is a payout guarantee no matter when you pass away, unlike term insurance. Term insurance is less expensive because the goal is not to die while covered by the policy.

The Takeaway - In general, the benefits of buying life insurance outweigh the disadvantages. Life insurance can help protect your family in case of an early demise and is a steady savings vehicle for retirement. However, there are various policies available, and not every policy fits everyone’s unique financial situation. That is why it is essential to understand your options and work with a financial advisor that you trust to find a suitable policy.

Purchasing Life Insurance On Someone Else

Life insurance is a financial planning tool that provides a tax-free payout to designated beneficiaries after death. Most people purchase a policy to help plan for their death and leave their dependents and loved ones with a financial cushion.

However, there are occasions when someone may want to purchase a life insurance policy for someone other than themselves. While there are options available to do this, there are also guidelines that need to be followed before purchasing a policy on someone else. 

Can you take out life insurance on anyone - Generally, it is impossible to take out a life insurance policy against someone that has no relation with you. Betting against someone’s life is not only unethical, but also does not make financial sense for life insurance providers.

However - it is possible to take out life insurance on someone else only if there is some relationship between you, such as a friend, business partner, spouse or parent - and only if the person being insured consents to a life insurance policy being taken out on them.

Life insurance companies also require that the relationship passes the “insurable interest” test, which means demonstrating that the insured’s death would have an adverse impact on the person who wants to purchase the policy.

A: Purchasing life insurance for anyone follows the same basic steps.

Select a type of life insurance policy - The first decision is whether permanent or temporary coverage is necessary. Term Life Insurance is cheaper than Permanent Life Insurance and is a temporary solution for a period of time such as 10, 20 or 30 years. Whole Life, Endowment  or Investment-linked Insurance, which are types of permanent life insurance, stay in effect as long as the premiums are paid and build a cash value amount that can also be used to borrow or withdraw money.

Getting Quotation - No matter what kind of life insurance coverage is needed, it’s a good idea to shop around for quotes from several life insurance carriers to find the best price and terms. The same type of coverage could vary in price, coverage, benefits, exclusion and limitations from one carrier to another.

Get permission - Once it’s time to apply, the next step is to get permission from the person you plan on insuring. They will need to sign a consent form and likely undergo a medical exam before the policy is approved. Even if a policy that doesn’t require a medical exam is selected, failing to obtain signed consent from the person you’re buying the policy for is considered insurance fraud.

B: When to buy life insurance for someone else - Some circumstances make purchasing a life insurance policy on someone else a smart financial decision.

Financially protect family members - For people who are raising children together and have assets such as a home, a life insurance policy could make up for the lost income if one of them passes away. A life insurance policy on an aging parent could provide cash to pay off debts left behind or cover burial costs. And families with a higher net worth may want to consider life insurance to pay any estate taxes.

Ensure business continuity - The death of partners or key employees can sometimes endanger a company. While a life insurance payout may not replace the individual’s skills and knowledge, it could provide capital to recruit a replacement or cover critical costs while the business adjusts.

Guaranteed future coverage - Some families have a history of genetic conditions and chronic illnesses (such as diabetes or heart disease) that make obtaining life insurance coverage difficult. A permanent life insurance policy for a child or young adult that is purchased while they are still healthy guarantees coverage, even if they’re diagnosed with a health condition in the future.urance.

Selangor Peduli SIhat

The Selangor state government is revamping its Peduli Sihat Scheme (underwriting the Peduli Sihat Insurance Scheme) into an RM1.4 billion health insurance programme next year with basic benefits for low-income residents.

RM42.5 million has been allocated for 85,000 families/policy holders. This Rm42.5 illion is insurance premiums borne by the state at RM500 per family for 85,000 families next year.

PEDULI SIHAT - offers  as well as four insurance benefits:

• Death or total permanent disability (TPD) by accident (RM5,000 payout)
• Death or TPD by natural causes (RM5,000 payout)
• Critical illness (RM5,000 payout)
• Funeral expenses (RM1,000 payout)
• A maximum RM500 per year to spend on primary care, including medical check-ups and vaccination, in private clinics,

Each family is entitled to one claim from each insurance category in a year. There are 1,529 panel clinics under the Peduli Sihat Insurance Scheme in Selangor and the Klang Valley.

WHO IS AVAILABLE - Peduli Sihat is availanle to families living in Selangor with a monthly household income of RM2,000 and below, who must be born in Selangor or have lived in the state for at least 10 years. Beneficiaries must be Bantuan Sara Hidup (BSH) cash aid recipients.

SELGATE Healthcare CEO Muaz Omar said SELCARE Insurance PCC Ltd — which is  — is providing a maximum payout of RM1.4 billion next year, which translates to a 3,300 per cent return on investment, based on RM42.5 million in premiums paid by the state. SELCARE Insurance PCC Ltd is a wholly owned subsidiary of SELGATE Healthcare, which is a wholly owned subsidiary of SELGATE Corp, which is in turn a wholly owned subsidiary of state-owned development agency Selangor State Development Corporation (PKNS) in the country’s most developed state.