On 12 July 2022, EPF launched i-Lindung, an initiative which allows its members to buy life and critical illness insurance policies at affordable prices. Personally, I view this favorably as I believe insurance is a key component to proper financial planning. One should have sufficient life, medical and critical illness coverage to face several potential financial calamities, if any arises.
I checked out the insurance products offered under i-Lindung. Of which, I like to share 4 pointers that all of us should take note when considering them to boost our existing insurance coverages:
#1: The Insurance Companies & Their Products
Presently, I discovered that there are 3 insurers that offer 10 different insurance products under the i-Lindung initiative. They are FWD, ETiQa and Prudential. Of which, 6 are takaful products and the remaining 4 are conventional products. In terms of insurance coverages, 5 offer both death and total permanent disability (TPD) benefits and the other 5 are critical illness policies. These policies differ in terms of:
1. Maximum Sum Assured.
2. Number of Critical Illness Covered.
3. Entry Age.
I summarize my findings as follows:
#2: The Premiums
Their premiums are calculated based on our current entry age. Hence if you are 30 this year, your premium would be lower than one who is 50 this year. After 1 year, the renewal premiums would be based on the age of 31, 32 and so on and so forth. Therefore, the premiums are not exactly fixed for eternity.
Personally based on my current age, the premiums for these products are:
Source: EPF; Premiums are based on my current age.
The above premiums are based on my current age. Your premiums would definitely be different from mine if we are not of the same age.
Under the i-Lindung initiative, we are allowed to buy all 10 products (1 each). In my case, I could add on RM 700,000 in death and TPD benefits and RM 400,000 in critical illness coverage with an annual premium of RM 1,884 or a total of RM 157 in monthly premium.
From my observation, it is not easy to find such deals with local insurers today. I would say, based on my premiums and benefits, this is worth considering.
#3: i-Lindung vs Individual Life Insurance Policies
So, should I choose i-Lindung over individual life insurance policies?
The answer is nope. Let me explain. First, i-Lindung offers group policies and so, we are not required to undergo any medical examinations to buy these policies. Hence, if you have pre-existing medical conditions, you could check out deals at i-Lindung to secure yourself additional life insurance policies.
But as individual life insurance policies, they are underwritten individually. So, if you are healthy today, I believe you should prioritize them first as you could get these individual policies at normal premium rates. Then, you may use i-Lindung as a sweetener to your existing individual insurance policies.
Second, the maximum tenure of individual policies could go as high as 99 years, which is higher than the maximum tenure of 60 or 70 offered by i-Lindung. So, I think i-Lindung should not be viewed as a substitute over individual policies but rather as a complement to one’s overall financial protection needs.
In essence, it would be ideal to have both.
#4: Tax Planning for Business People
First, we are eligible to obtain tax relief for products bought under i-Lindung. As I write, the only payment method to purchase these products are deduction via our balances at EPF Account 2.
So, let’s say I’m a self-employed dude who didn’t contribute to my EPF account.
Here, I want to buy all 10 products under i-Lindung. Hence, my premium will be RM 1,884 for this year. What I could do is to voluntarily contribute a total of RM 6,280 into my EPF account. Out of which, RM 4,396 (70% of the RM 6,280) shall be credited into my EPF Account 1 and my RM 1,884 (30% of the RM 6,280) will be credited into my EPF Account 2. As a result, I would be able to obtain:
1. RM 4,000 in tax relief for my contribution into my own EPF account.
2. Additional dividends from the RM 4,396 contributed into my EPF Account 1.
3. Tax relief for life and medical insurance premiums
Thus, my net premium for the 10 insurance products would be:
I would say the more income I make, the more tax relief I would receive. In fact, it is possible for my premiums on the 10 policies to be relatively negligible after factoring in the various tax reliefs and additional EPF dividends to be received.
So, you might want to factor in all these tax reliefs and EPF dividends, when you plan to buy all these insurance policies.
Personally, I think i-Lindung is a great initiative and would encourage all of us to
log into our EPF account and check out these insurance deals. So, if you want to learn more about it, you may check out the following details:
i-Lindung Hotline: 03-89224848