On the whole, Malaysians are very familiar with the concept of life insurance. For some years now, awareness of the need to purchase life insurance has been on the rise. This is partially due to higher education levels and greater exposure to financial products amongst the general public, and also the large number of insurance agents who have been actively making inroads into the Malaysian market for years now.
As a result, many urban middle-class Malaysians have purchased at least one or more life insurance products. People who purchase life insurance products are usually those who care about their own well-being and that of their loved ones, and are prepared to sacrifice immediate short-term gain for long term benefits. They are financially responsible and prudent, and plan ahead to prepare for life’s contingencies and eventualities. They are disciplined and focused, opting to contribute towards a policy for the long-term benefit of themselves and their dependents, instead of succumbing to the temptation to burn the cash on fancy gadgets and gizmos.
However, there is still plenty of room for a higher take-up rate in the Malaysian market, especially amongst the rural population who at present might be less aware of the benefits of such products. The likelihood of a steady increase in the percentage of Malaysians purchasing life insurance is high, given the fact that approximately 40% of Malaysia’s population is under the age of twenty. In the hype of offers made by many insurance companies, it is best to do your homework, and made comparison for insurance policies that suit you best.
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Here are a couple of tips/facts of interest to would-be policyholders:
1. There are various products for different needs
A range of products and services is offered under the life insurance umbrella, depending on the service provider/organisation. Some of them include income protection plans, savings and investment plans, retirement plans, education plans, business continuity plans and of course, health and medical plans.
2. You need to go through an application process
The applicant for the insurance policy needs to go through an underwriting process first, after which the insurance company will determine whether or not to accept the risk of insuring the applicant. The insurance company will determine the risk of mortality and assign the applicant a risk class, based on a variety of factors such as medical history, age, habits, occupation and other personal details. The insurance company will study the information provided by the applicant in the application form and any medical reports available at hospitals or clinics, and come up with the appropriate assessment and risk profile.
3. Not everyone is eligible for life insurance coverage
Those who have the misfortune to already have been diagnosed with a particular illness, could either find that they cannot buy a life insurance policy, or that their premiums are heavily loaded. This could happen even if the applicant did not disclose the information in this application form. This is because the insurance company has various ways and means to access medical information, so it is really not advisable to lie or omit information from your application form. An insurance contract is premised on full disclosure on a good faith basis. If you withhold information, eventually, the insurance company will find out, and deny you coverage when you make a claim. Honesty is the best policy in the long run.
4. The best time to buy is when you are young
While people tend not to think about things like life insurance until later in life, the best time to buy life insurance is actually when you are young and healthy. Preferably, in your twenties. This is simply because the older you are, the more likely medical complications would have surfaced or would have started to surface.
5. A Trustworthy agent is essential
Find yourself a good agent who can be trusted to advise you. Ask your family and friends for personal recommendations. Even if the agent was referred to you however, always check your agent’s background. The agent should only be representing one particular life insurance company. The agent should also be registered with the Life Insurance Association of Malaysia (LIAM). You should request to sight the agent’s authorization card, prior to accepting his/her advice.
Nowadays, you also have the option to deal with licensed financial planner that have the Financial Advisory licence, which allows them to represent more than one life insurance company. They are commonly known as FA, not insurance agent though.
6. For traditional policies, there are participating policy and non-par.
Understand the difference between life insurance policies, ie. a participating policy and a non-participating policy. A participating policy means that the policyholder shares in the profits of the life insurance company, usually in the form of dividends, or bonuses. Non-participating policies do not offer this aspect to the policyholder. It is best to sit down with your agent and have him/her explain anything that you do not understand.
7. Buy according to your affordability (think very long term)
Do the math – be very sure that you can afford the premium payments, right from the start. Once you have signed up for the policy, your agent will assist you to set up a direct debit facility on your credit card, and the monthly premiums will be direct debited from your account. So, you need to carefully calculate beforehand how much you can comfortably afford; to ensure that the regular direct debits will not negatively impact your cashflow for each month, while at the same time enabling you to maintain an insurance policy which provides sufficient security to your loved ones in the event of an unforeseen event.
8. Read your policy details
Read your policy very carefully. It is a complex legal document and a lot of convoluted language is used. A few questions apply across the board. What are your commitments, rights and obligations? What is the extent of your coverage? How are the premiums calculated? What are the exclusions that you need to be aware of? Go through it line by line with your agent. Ask the agent to explain things which are not clear. Don’t feel intimidated or be afraid to ask questions. Never ever just sign on the dotted line without understanding what you are getting into.
9. Don’t simply surrender your policies
Do not jump from policy to policy, regardless of what friends, neighbours or colleagues may tell you. A life insurance policy is a long-term commitment and like all long-term commitments, there are penalties for premature termination. The surrender value (also known as the cash value) is what will be refunded to you when you terminate early, but it is not likely to match what you have already paid into the policy overall. Further, taking up a new policy when you are older, will subject you to higher premiums and tighter conditions, especially if certain health issues have surfaced by then. It could be a far more costly exercise, the second time around.
10. Review your protection need regularly
Review your insurance portfolio at least once every three years. Keep in close contact with your agent. If circumstances have changed, speak to your agent about whether any information needs to be updated. Ask your agent whether there are any special deals or offers you might be able to take advantage of to increase your coverage for little or no additional premiums. Sometimes, insurance companies offer upgrading packages whereby policyholders who purchased products early, can take advantage of subsequent offers and packages.
Hopefully, the above facts and tips have been informative and helpful. As with all matters of a complex nature with potentially far-reaching implications, always consult a licensed agent to obtain the relevant professional advice about any particular class of insurance or product offered by any insurance company.
