Life Insurance Business

"Malaysia’s life insurance business is expected to grow by 9% to 10% in 2013" - LIAM

Critical Illness Coverage

Do you need critical illness cover (also known as 36 dread diseases cover)?

Increasing Medical Cost

Healthcare costs in Malaysia increases about 10% every year - approximately double the inflation rate.

2 out of 3 people will be diagnosed with Critical Illness

If you think that the premium is high, what about the cash needed for a critical illness?

Get to know us today!

“In the next 5 years, without changing our current situation, can we achieve the time, money and lifestyle that we want?”

Monday, December 17, 2012

Top 5 Life Insurance Myths


Life insurance is not a simple product. Even term life policies have many elements that must be considered carefully in order to arrive at the proper type and amount of coverage. But the technical aspects of life insurance are far less difficult for most people to deal with than trying to get a handle on how much coverage they need and why. This article will briefly examine the top 5 misconceptions surrounding life insurance and the realities that they distort. 



Myth #1: I'm Single and Don't Have Dependents, so I Don't Need Coverage
Even single persons need at least enough life insurance to cover the costs of personal debts, medical and funeral bills. If you are uninsured, you may leave a legacy of unpaid expenses for your family or executor to deal with. Plus, this can be a good way for low-income singles to leave a legacy to a favorite charity or other cause

Myth #2: My Life Insurance Coverage Needs Only Be Twice My Annual Salary

The amount of life insurance each person needs depends on each person's specific situation. There are many factors to consider. In addition to medical and funeral bills, you may need to pay off debts such as your mortgage and provide for your family for several years. A cash flow analysis is usually necessary in order to determine the true amount of insurance that must be purchased - the days of computing life coverage based only on one's income-earning ability are long gone. 

Myth #3: My Term Life Insurance Coverage at Work Is Sufficient 
Maybe, maybe not. For a single person of modest means, employer-paid or provided term coverage may actually be enough. But if you have a spouse or other dependents, or know that you will need coverage upon your death to pay estate taxes, then additional coverage may be necessary if the term policy does not meet the needs of the policyholder. 

Myth #4: Only Breadwinners Need Life Insurance Coverage
Nonsense. The cost of replacing the services formerly provided by a deceased homemaker can be higher than you think, and insuring against the loss of a homemaker may make more sense than one might think, especially when it comes to cleaning and daycare costs. 

Myth #5: I'm Better off Investing My Money Than Buying Life Insurance of Any Kind
Hogwash. Until you reach the breakeven point of asset accumulation, you need life coverage of some sort. Once you amass RM1 million of liquid assets, you can consider whether to discontinue (or at least reduce) your million-dollar policy. But you take a big chance when you depend solely on your investments in the early years of your life, especially if you have dependents. If you die without coverage for them, there may be no other means of provision after the depletion of your current assets. 

The Bottom Line
These are just some of the more prevalent misunderstandings concerning life insurance that the public faces today. Therefore, there are many life insurance questions you should ask yourself. The key concept to understand is that you shouldn't leave life insurance out of your budget unless you have enough assets to cover expenses after you're gone. 






Monday, December 10, 2012

Why Single Women Need Life Insurance?

If you are a single woman, chances are you haven’t given much thought to purchasing a life insurance policy. But as the head of your household, even if your household consists of just you, there are some compelling reasons why you should consider purchasing a life insurance policy.


Single Woman with No Children:

Have you ever thought about what would happen to your estate if you were to die unexpectedly? Who will be responsible for your debts (car loans, education loans, mortgage, estate taxes, etc.) if your estate does not cover these costs?

Well, chances are your family will be responsible. Can you imagine your aging parents or other loved ones who are living on a fixed income having to pay off your car, school loans and mortgage because there wasn’t enough money in your estate to cover these costs? And with the housing market still sluggish, selling a home may not be an immediate option to pay off these debts. But a life insurance policy can cover these costs and provide your loved ones with peace of mind during this difficult period. And, if you choose to remain single, your life insurance can accumulate cash value to help provide a secure retirement for yourself.

As a young, healthy, single woman, you have the opportunity to purchase a life insurance policy at reduced premiums. However, the older you are, the higher your premiums will be. Locking in a low rate for a fixed period of time is an excellent way to secure an affordable life insurance policy. One other benefit, the cash value of your insurance policy can also be used to secure loans.

Keep in mind, that should you decide to get married and/or have children, your life insurance needs will increase. Re-evaluating your policy with each life change is a smart move.

Divorced and Widowed Single Moms:

Did you know that only 4 percent of all life insurance policies sold in 1997 were purchased by divorced or widowed women (“The Women’s Market: Myth & Reality,” LIMRA International, 1999)? This startling fact means that a majority of the 11 million single moms in the U.S. today are without life insurance. 

As a single mom, if you do not have life insurance, you run the risk of not having your children’s basic needs met should you die unexpectedly, especially if there is not a father in the picture. (Note: In addition to providing for your children’s college tuition and living expenses, single moms may need to factor in additional expenses such as child care and domestic help that a life insurance policy could cover).

The Amount of  Life Insurance You Need is Determined By:

  • Your age
  • Debt
  • Whether or not you have children
  • The number of children you have
  • The ages of your children
  • Your overall health
  • The amount of money your family will need to survive
What Type of Life Insurance (term, whole life, annuity, etc) Should You Purchase?
Ask us for policy options, terms and conditions, premiums and the ability to change your policy should you have a major life change such as getting married and/or having children. But before you do, spend some time educating yourself on the types of policies available and become familiar with the terminology.
Adapted from : http://singlemindedwomen.com/money-tips/why-single-women-need-life-insurance/

Saturday, December 8, 2012

Who Actually Need Insurance?

Majority of the society think that they belong to a group of people that does not need insurance.

The rich will always think that only the average or poor need insurance as they are not afford to pay for medical bills and etc.

The average / poor always has the perception that only the rich need insurance as they can afford to buy it.

Actually, doesn't matter if we are rich or average or poor, we all need insurance because insurance plays its respective role to the rich and the average or poor.


The Rich

If you are rich, I am pretty sure that you have a lot of property and money. You may also have a very high income and be able to afford many things for yourself and your family.

But, did you realize? If you were diagnosed with critical illness last night, your family will need to sell your property(ies), and use up all your savings just to pay your medical bills?

Not only your property will be sold in a cheaper price due to urgency, the time taken for the deal to be sealed can be frustrating! Thus, it may not be enough for your medical bills and will cause your family to go poor and end up borrowing money from others.

With insurance, you do not need to use up your savings or sell your property to pay for your medical bills. Living expenses for you and your family during the time when you are not able to work can also be provided by insurance.

In another words, your family will not suffer, lose their property and income.

All you need to do is to "transfer" small part of your income to insurance so you can protect the rest of them.

The Average / The Poor

For the average / the poor, not only your income is just enough for your daily expenses, you might have other commitments too.

And did you realize? If your income is just enough to cover your daily expenses, what will happen if you are diagnosed with critical illness yesterday and you lose the ability to earn money anymore? What will happen to your family and your children (if you are married with kids)?

Well, you can send your children to orphanage but the fact is, many orphanages in Malaysia also need funding from the generous!

Won't you feel guilty to let your children, that you loved so much, live in a tough environment and perhaps being marginalized by others due to lack of money?

Very obvious, with insurance, you are able to "create" your life saving fund and perhaps some inheritance immediately, although your income is not high.

It doesn't matter if you are diagnosed with critical illness, paralyzed or passed away,  your responsibility to take care of your family can be accomplished.

Try to adjust your budgeting a little bit so you can at least get minimal insurance coverage to protect yourself.

Even though the coverage is small, the benefit from insurance will mean a lot to your family because it proves that your love stays on even though you are not around. Your love for your family will always be in their heart.


Thursday, December 6, 2012

Private Hospitals in Malaysia


According to Association of Private Hospitals of Malaysia (APHM), there are 106 private hospitals in Malaysia that has registered as their member. I am sure there are a few that are not registered as their member.

Source : Association of Private Hospitals of Malaysia

Number of Private Hospitals that are registered with Allianz Life Insurance Malaysia Berhad as Panel Hospitals is 106 too.


Wednesday, December 5, 2012

Critical Illness Coverage - How Much Do You Need?

After discussing the issue on Medical (Hospitalization & Surgical) Insurance, we come to another popular type of protection - Critical Illness Coverage. Some may call it, 36 Critical Illnesses Coverage, Dread Disease Coverage, and many more.

Before we go even further, let's clear the air up so the confusion does not prolong.
When it comes to Health Insurance Protection, many are confused or even misunderstood with the differences between Medical Insurance Protection & Critical Illness Protection.

When asked, "Does your policy has Critical Illness coverage?"
The answer will be, "Yes, got cover..."
But the moment when we start reviewing their policies, we found out that there isn't any coverage on Critical Illness.

The most common confusion or mistake is that many thought that Critical Illness Protection means when they are diagnosed with any one of them, their treatment fee will be taken care of. Yes, that is right when you have Medical Insurance.

However, many has forgotten that Medical Insurance only pays the hospital (treatment fee). What about your living expenses after that? Most probably, you will lose the ability to work after diagnosed with Critical Illness. You need money to settle your Mortgage Loan, Car Loan / Hire Purchase, Daily Expenses (Food, Clothing and etc). Who is going to finance them when you lose your ability to work / ability to earn?


Critical Illness Protection

This Protection is somewhat like a Russian Roulette with 36 choices of Critical Illness. Hit any one and you will "win the reward" with the jackpot amount. Say your Critical Illness Sum Assured is RM500,000, that will be the amount you will be compensated when you are diagnosed with any one of the Critical Illness (Terms and Conditions apply). You will receive a cheque with the full amount!

If your are only insured for RM20,000, then that's too bad. Depending on the severity of your illness, it is not going to be enough. But RM20,000 is what you going to get to get through, if you ever get through at all!

There are 36 types of Critical Illnesses. Let's take a glance at them.


Source : www.allianz.com.my (HealthCover / HealthCover Plus)

Now comes a question - How much do I need?

There is no definite answer for that question. 
"You need RM1 million for your Critical Illness Protection," your Insurance Consultant will tell you.

However, my way to help you (at least) determine how much you will need is rather straight-forward.

Say you have a premonition (A strong feeling of something about to happen, esp. something unpleasant) that you are going to be diagnosed with one of the Critical Illnesses. However, when you woke up from that vision, you didn't see which illnesses you are going to be diagnosed with! Good news, at least you saw it coming before it happen, unlike your neighbour who died of stroke with no warnings and NO insurance!

So, you quickly call up your Insurance Consultant and ask her to come to your house right away. While waiting, you try very heard to search your memory to see if you can find traces of information about which illnesses you are going to get. 

Your Insurance Consultant arrives and you told her about your premonition and she asked you to sign on the dotted lines. Trust me, your Insurance Consultant will look very surprised that you called to get protected!

Then you suddenly thought what if your premonition isn't true?
What if you spend all your money on Critical Illness Protection and it did not happen? 
You are now stuck in a dilemma! But you finally made a decision to get as much coverage as you can afford so you will not need to change your family's lifestyle.

What if your premonition is true? Then you have to make sure your Critical Illness Protection has at least 5 times your annual income (if you are single) or 10 times your annual income (if you are married with children), simply because of the followings:

i) Daily expenses for at least 2 - 3 years in case you are not able to go back to work.

ii) Your outstanding Mortgage Loan Repayment / Car Loan or Hire Purchase Repayment

iii) Extra money to cover your spouse's income as he or she may need to opt for a job with lesser workload to take care of you. Less workload means lower income.

iv) Post Hospitalization Expenses / Traditional Chinese Medicine / Alternative Treatment - You can't be jumping up and down actively right after you discharge from the hospital. The term "critical" means no joke ya! Chances are, all these expenses may cost as much as your hospitalization bill.

Finally, after thorough consideration, you finally made a decision to get as much Critical Illness Protection as you can afford. At least an amount that will not affect your current lifestyle (if your premonition did not come true) and to have at least the protection that can help to ease you and your family (if your premonition is true).

Hope the above guideline can help you to make a better decision in determining how much you need in your Critical Illness Protection risk management portfolio.

Monday, December 3, 2012

留爱,不留债 Leave Love, Don't Leave Debt


Recently, I came across a TV ad from a French insurance company.

I like the storyline as it is very true and touching.

Note: It is based on true story

Sunday, December 2, 2012

Sum Assured = How Much Love


Have your partner ever asked you, "How much do you love me?"

What would be your answer?
"As deep as the sea."?
"Sky is the limit."?


I don't think there is a definite answer for that.
But if you were to show how much you love your life partner in terms of numbers, then there is no other better way than to set that amount in your insurance sum assured (and of course, make sure your life partner is the beneficiary!). Some say it is an amount that you are willing to afford to take care of your life partner when you are no longer there.

Li Ka-shing said: "People thought I was rich, in fact, my greatest wealth is to themselves and their families buy enough insurance."

There are many forms of love. With our love ones as beneficiaries to our own life insurance will make sure our love stays on forever. Some may say, "If I leave so much for my wife, she will remarry when I am dead." Well, I say the husband is the one who left his widow no choice. Why she needs to remarry when she receives huge sum of money from your insurance claim?

p/s: If she is going to remarry when she gets rich, she might as well do it now.

Saturday, December 1, 2012

Only MRTA? You May End Up Losing Your House!

MRTA is defined as a term insurance that helps cover the outstanding amount of home loanprovided by a financial institution in events of permanent disability or death of a particular borrower. Before proceeding, keep in mind that MRTA is normally calculated to meet the outstanding loan amount


What happen is after you buy a house, the mortgage agent will normally ask you to buy a bank MRTA. They will advise you to financed into the loan and you will only pay a little bit extra per month. Sounds fantastic!

You overlooked that buying MRTA may not able to fully protect your asset and your family!

Oh, when you bought MRTA, the beneficiary is the bank. If you passed away or suffer from TPD, the bank get the mortgage outstanding balance from the insurance company (of your MRTA policy) and the bank is safe.

So what happen to your house? Wait... common answer will be, "My family gets it lah!"
Wrong!

Your house will be frozen under the estate, your asset will then be used to settle other liabilities such as clearing income taxes (which include any outstanding and uncleared taxes), settle legal expenses, clearing debts from creditors (credit cards) and etc.

After that, if your asset is larger than your liability, your family will then receive the asset. Otherwise, your estate will be declared insolvent or commonly known as bankrupt. Your family will be required to leave the house even though the insurance benefit from MRTA has been paided out. Sounds unfair?

MRTA protects the bank, you and your family are only being protected - with condition.

If you opt for a personal MLTA / Life Insurance, the beneficiary is your family (or whoever you named). Should any mishap happens, your family will get the insurance claim equal to the value of the house (or an amount agreeable at the point of sale). Best part is, proceed from insurance claim is creditor proof and will not be frozen!

Oh, the house will still be frozen of course as it is subject to the same estate execution process.

2 things will happen:

i) If your asset is lesser than your liability, your family have at least the money from the insurance claim. They can buy a new house now.

ii) If your asset is larger than your liability, your family can keep both the house and insurance claim!

Make sense?

Good news! If you decided to move to a bigger house, ONLY your Life Insurance can be used for your new loan.

Friday, November 30, 2012

Debt After Death

Nearly 60% of people don't have a life insurance policy and 64% have a mortgage which they haven't fully paid off, potentially jeopardising their families' financial futures. Despite the potential advantages of life insurance being all too clear, many people still don't have this protection.

Most people (60%) don't have life insurance to protect their family financially if they pass away, even though nearly two-thirds (64%) still have a mortgage - which means they would leave their loved ones with a hefty bill if they passed away.

However, one in three (34%) are prepared for any eventuality and admit they are worth more dead than alive due to the size of the life insurance policies. 

According to the Association of British Insurers (ABI), insurers in the UK pay out on average £37 million every day to help people cope with the financial burdens that come following a death in the family.

Yet the research found that the loved ones of more than one in ten (11%) of those polled would be homeless if they died. Insurers are concerned that many people are not sufficiently covering their families for such eventualities.

And with (30%) of couples having a joint mortgage and more than half (57%) holding a joint bank account, many would struggle with bills if one party dropped out and this could also mean they'd have to take on joint debt on their own without life insurance.

The loss of a loved one is a stressful time without having to worry about not being able to afford the mortgage bills. A debt such as a mortgage should ideally be backed up with life insurance so that it can be paid off in part or in full if one of the mortgage holders should die.

Term insurance, the most common type of life insurance, is what is usually used for mortgage protection. It will pay a tax-free lump sum if you die within a specified period of time, for example 25 years.

The aim is for the lump sum to be used to clear any outstanding debt against the property, which will ensure loved ones are not left without a roof on their head or with hefty bills they cannot service if you die.


Source: http://askpakdeh.blogspot.com/

Thursday, November 29, 2012

Cardiovascular Disease - No. 1 Killer in Malaysia


Cardiovascular disease remains the number one killer in Malaysia, with hypertension topping the list. Malaysian Society of Hypertension vice-president Dr Azani Mohamed Daud said although hypertension was the most common disease in Malaysia, many were unaware they had it.
“Last year, only 35 per cent of people with hypertension were diagnosed, with the rest unaware they had it,” he told the “Are you at risk?” campaign at a hotel yesterday.
The campaign was organised by the Heart Foundation of Malaysia and pharmaceutical manufacturer Xepa-Soul Pattinson Malaysia in conjunction with World Heart Day in September.
The foundation director, Datuk Dr Khoo Kah Lin, said it was cheaper to prevent the disease rather than to cure it. He said there were two main approaches to prevent hypertension — the polypill and polymeal concepts.
“These two methods can help reduce heart disease and stroke, and could prolong life,” he said. Polypill, in use since 2003, is a combination of six drugs and vitamins that address the risk factors of heart disease.
According to the British Medical Journal, taking the combination of pills daily lowers the risk of a heart attack by 88 per cent and stroke by 80 per cent.
Polymeal is a diet plan that includes red wine, dark chocolate, and fruit and vegetables that can reduce the number of patients with cardiovascular disease by 76 per cent.
“With the correct amounts each day, those who adapt these approaches when they reach 55 years old will see a positive outcome.”
He urged people to consult their doctors on both methods, and said leaflets would be distributed with explanation on them.

Source: http://www.asiaone.com/Health

Wednesday, November 28, 2012

Cancer - Global Killer

Cancer is a generic term for a large group of diseases that can affect any part of the body. Other terms used are malignant tumours and neoplasms. One defining feature of cancer is the rapid creation of abnormal cells that grow beyond their usual boundaries, and which can then invade adjoining parts of the body and spread to other organs. This process is referred to as metastasis. Metastases are the major cause of death from cancer.

The problem

Cancer is a leading cause of death worldwide and accounted for 7.6 million deaths (around 13% of all deaths) in 2008. The main types of cancer are:
  • lung (1.37 million deaths)
  • stomach (736 000 deaths)
  • liver (695 000 deaths)
  • colorectal (608 000 deaths)
  • breast (458 000 deaths)
  • cervical cancer (275 000 deaths) (3).
About 70% of all cancer deaths occurred in low- and middle-income countries. Deaths from cancer worldwide are projected to continue to rise to over 13.1 million in 2030.

Source: WHO

Medical (Hospitalization & Surgical) Insurance

There is another protection that you should already have in your risk management portfolio. Let me put it straight to you, after the chance of involving in an accident, the next highest possible mishap would be ending up in the hospital and required to stay a night for observations. Your admission could due to any causes, accident-related, common symptoms such as food poisoning, dengue fever and even acute appendicitis!

Rest assured that your stay will definitely cost you money. If you are admitted to a private hospital, prepare to pay an arm and a leg (simply means paying a lot of money for something).


What is covered under the Medical (Hospitalization & Surgical) Insurance?

The main coverage would be the Room & Board (R&B), almost like a hotel room package. A typical Medical Insurance R&B package would look like this:

Source: www.allianz.com.my (MediCover)

Room & Board RM200 means that you are entitle to stay in ward package with rate of RM200 and below. However, you can still request the hospital to upgrade your room to a better one (e.g. from Twin Sharing to Single Room), but there are terms and conditions applied by respective insurance companies.

The Annual & Lifetime Limit is tied to the R&B. In general, the Table of Benefits would look like the above table. You should refer to your policy documents for the actual Table of Benefits to see the exact figures. The Annual & Lifetime Limit gets lesser as you make claims.

Co-Insurance / Co-Payment is a common phrase in Medical Insurance policy write-ups. It means that you as the policyholder will be required to pay a certain percentage from the total claims made. If you policy didn't mentioned anything on Co-Insurance or Co-Payment, then it usually means that all claims are to be borne 100% by the insurance company.

Various insurance companies has different percentage set as Co-Insurance or Co-Payment, ranging from 10 to 20 percent. Some plans would also have cap on the Co-Insurance / Co-Payment, and some don't!

For your own benefit, you are encourage to check if your Medical Insurance has no Co-Insurance / Co-Payment or, if there is, make sure there is a cap limit for it. Else, it would seemed illogical for you to pay your insurance premium and fork out for the medical bill at the same time.

Here are some other important elements in the medical coverage that you should look into:

i) Pre-hospitalization and Post-hospitalization claims, where you need to find out how many days of pre-hospitalization and post-hospitalization is claimable.
ii) Limits payable for outpatient treatments; for Accident, Cancer and Kidney Dialysis respectively.
iii) Room & Board and Intensive Care Units (ICU).

Here are some tips for Medical Insurance:

i) Declare all your health and medical history when you are applying to ensure you will not any problems when it comes to claim later on. You might want to ask your parents about any disease that you might have inherited.

ii) Always keep the Original Receipts for speedy claims.

iii) Always keep your Medical Card (if any) by your side (or in your wallet).

iv) You might need to place a deposit even if you have a valid Medical Card, so it is best to have a credit card or two to ensure a smooth admission process.

v) Go for the best possible Medical Insurance plan you can afford, it is always easier to downgrade than to upgrade. As long as you are healthy, upgrading should not be a problem.

Medical Insurance should be in your priority when you are shopping for your first insurance policy due to the high possibility of being admitted in a hospital.

Let's hope one day that banks or private hospitals can provide loans for medical fees which we all can pay by installments. But until that day comes, it is a better idea to ensure you and your entire family is protected at least with a minimal amount.


Tuesday, November 27, 2012

Personal Accident

Personal Accident (PA) insurance is consider one of the most important insurance protection not only because it is very affordable but the possibility of claiming from a personal accident insurance protection is higher than natural death or critical illness claim. 


PA coverage protects you from accidental risk - any injury or death caused by accident. You can make a claim from losing an arm or accidentally cutting of a finger while preparing your meal. However, do not mistaken with Total and Permanent Disability (TPD) protection.

TPD is usually defined as:

(a) Becomes permanently and completely unable to engage in any occupation and is permanently and completely unable to perform any work for remuneration or profit.

(b) is deemed to be caused by any of the following:

i) Totally and irrecoverably loses sight in both eyes.
ii) Totally and irrecoverably loses by severance one limb each at or above his wrist and ankle, or two limbs at or above his wrist or ankle.
iii) Totally and irrecoverably loses sight in one eye and totally and irrecoverably loses by severance one limb at or above the wrist or ankle.

(c) Or by unable to fulfill any 3 of the following activities:

i) Transfer 
ii) Mobility
iii) Continence 
iv) Dressing 
v) Bathing / Washing
vi) Eating 

From the definition above, it is not easy to fulfill the TPD's requirements. If you happen to lose only one arm in an accident, your TPD protection will not provide any payout. The chances of involving in an accident are way much higher than any other risks that we might face every day.

One more reason why you must have a Personal Accident protection in your risk management portfolio is that the premium is super cheap! The insurance charges rate is the same from the day you were born till the day you leave Earth. Oh, there is a maximum entry age though, usually age 55.

Here is an example of Personal Accident protection premium rate.

Due to space, table above only shows the Principal Sum Insured. There are 18 other benefits in the protection.
Source : www.allianz.com.my

As you can see from the table above, a RM240,000 (with 18 other benefits including Weekly Benefit) Personal Accident protection cost only about RM358 a year. That is RM29.83 a month and it is renewable at the same rate as long as you can afford it.

So, you should seriously look into your policy documents to check if you have a Personal Accident Protection either attached as a rider or a stand-alone plan. You might want to check with your employer to see if they have a Group PA for staff. PERKESO (SOCSO) benefits should be given by your employer too. However, there is a limit to the benefits covered. For more information on PERKESO, visit PERKESO.

I would recommend at least a RM500,000 of Personal Accident protection for a 30-year old working adult. If you are married, why not consider getting a Family Package for your spouse and children since it is usually cheaper this way.

Not to forget, some credit cards or telcos even give free Personal Accident protection for a year at absolutely no cost to you!

Contact us if you want to add on Personal Accident Protection into your portfolio.

Comprehensive Protection / Coverage

In most of my post, the word "protection" will appear most of the time to replace the term "coverage" because I strongly believe that Insurance is Protection.


In the context of risk management portfolio, we always wanted the most comprehensive protection which protects as many risks as possible. One very good example that can be used as a metaphor is - Home Security. There are a few things we need to take note when it comes to setting up a good Home Security.

First, we do not know which door or window the burglar will try to break in from. If they really want something from our house, they will even dig a tunnel that leads right underneath our safe. In this sense, it is pretty much the same as the risk we faced everyday, you will never know when you will step right in front of an oncoming vehicle!

A good Home Security system takes care of every door and window from burglar infiltration. Every door and windows that might be an entry for the burglar to your house is protected, leaving nothing to chance.

If a good Home Security system keeps each and every door and windows from potential break-ins, what should your insurance protection plan do to ensure all your personal risks is taken care of?

We start with one of the most important protection you should already have by now - Personal Accident Insurance

Insurance - Needs vs Wants

Here's a truth.

You don't need insurance. Yes, you heard me right, you do not need insurance. However, before we discuss further on this topic, let us make sure our definition of "need" is the same.

To me, my needs are something that is essential to keep me alive. For instance, food, drinks, clothing, shelter and etc. I came across the Maslow Hierarchy which illustrates the classifications of human needs.

maslow_hierarchy
The Maslow Hierarchy

According to the hierarchy, you don't need insurance to survive. Rather, the decision to insure one's life or a loved one's is purely an act of love (Class No 3 in The Maslow Hierarchy). 

What happens when you don't have a single insurance protection?
It simply means that when you pass away, there isn't any compensation of money for that event. Sounds pretty crude huh? It's the fact!

So let's get back to the initial question: how would the act of love affect the way you choose your insurance coverage?

In the insurance industry, there's a term called "insurable interest". To illustrate this term, let's just say everyone is considered to have an insurable interest on their own lives, the lives of their spouse and dependents. And for your extra knowledge, insurable interest for life insurance needs only to exist at the time the policy is purchased. 

For example, after you sack one of your employees at work, the insurance policy that you bought for that employee would still be considered valid even after he is no longer under your employment. The insurance industry seems to take the term “true love never dies” pretty seriously.

Therefore, the insurance protection that you should have in your risk management portfolio should ideally shows the "amount" of love you have for the "insurable interest". Put it in another context, the coverage amount compensated should be adequate to protect you and your loved ones from a sudden financial crisis. The coverage amount should also be adequate to buy you and your family enough time to recover from the financial loss during the crisis.

If you are having problems finding out how much and what type of insurance you already have, you should seek out professional advice as soon as possible.

Monday, November 26, 2012

What is Life Insurance?


Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits.

The advantage for the policy owner is "peace of mind", in knowing that the death of the insured person will not result in financial hardship for loved ones and lenders.

Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion.

Insurance allows individuals, businesses and other entities to protect themselves against significant potential losses and financial hardship at a reasonably affordable rate. We say "significant" because if the potential loss is small, then it doesn't make sense to pay a premium to protect against the loss. After all, you would not pay a monthly premium to protect against a RM50 loss because this would not be considered a financial hardship for most. 

Insurance is appropriate when you want to protect against a significant monetary loss. Take life insurance as an example. If you are the primary breadwinner in your home, the loss of income that your family would experience as a result of our premature death is considered a significant loss and hardship that you should protect them against. 

It would be very difficult for your family to replace your income, so the monthly premiums ensure that if you die, your income will be replaced by the insured amount. The same principle applies to many other forms of insurance. If the potential loss will have a detrimental effect on the person or entity, insurance makes sense.



Insurance = Protection