Since I am an insurance agent myself, it is my job to always ensure my clients are all well protected. I will try to put it in a simple form so that you will know what can be insured in a life insurance policy. There are 5 major benefits:
1. Accidental Care
This is usually a rider attached to a main policy. It covers permanent disability, and death caused by accidents only. Accidents include car accident, fall down, etc. Normally it pays double the amount of sum assured if accidental death happens at a public conveyance (bus, passenger airplanes,LRT)
Adequate coverage: 5 times annual income
It is cheaper to get this accidental policy as a standalone plan from General Insurance companies.
Some people only have this type of policy. I always laugh at them. They never realize that they actually go to war with underwear only, no armour, no helmet, no nothing!
2. Hospitalization and Surgical Benefit (known as medical card or health card)
This benefits can cover all or most if not all of your medical expenses at hospital.
Adequate coverage: >RM150/day room and board benefit. Yearly limit of >RM50,000. Lifetime limit of >RM150,000.
Health card is not a credit card and it does not have money in it! If it is genuine cases, there will be not much trouble to get the Letter of Guarantee from the insurer when you are hospitalized. However, insurance company have the right to investigate before they pay out the claim.
3. 36 Critical Illnesses (Cancer, Stroke, Heart Attack etc)
It is different from the health card. This benefit is paid in a lump sum to our account, but not to the hospital. The purpose of this benefit is to replace out potential income loss when we take long leave for medical care.
Adequate coverage: 3 times annual income.
4. Total Permanent Disability (TPD)
TPD is a very severe case. After a person becomes TPD, it can be defined that he lost his ability to earn a living. There are 2 forms of benefit for TPD:
a) Lump Sum – this benefit is normally included when you purchase the policy for 36 Critical Illnesses.
b) Annuity – This is a separate rider which will pay you a yearly benefit. It is advisable to get the protection up to our annual income. However there is a maximum cap of RM50,000 per year per life assured per insurance company. If your income is more than that, you can consider to buy different policy from different insurer to get yourself fully covered.
5. Natural Death
No matter how you die, they will still pay your family this death benefit, except committing suicide within the 1st year. Since the life assured can’t enjoy this benefit, it is up to the individual commitment to their dependants to calculate how much coverage they should get. For instance, a father whose wife is taking care of his 1 year old son full time, it is advisable to be insured for at least the expenses of the family for up to 25 years.