What is Life Insurance?
Life insurance protects you against life’s uncertainties and loss of income resulting from the death of the policyholder or insured individual. Life insurance plans are protection plans offering protection to you and your dependents even when you (policyholder/ insured person) are not there. These plans pay out a sum of money either on the death of the insured individual or after an agreed period of time.
Life insurance plans come with a number of benefits in the form of risk coverage, protection against health expenses, investment benefits, retirement benefits and tax benefits etc.
How Life Insurance works
Life insurance is a kind of agreement between you and your insurance provider wherein your insurance provider promises to pay a pre-determined sum of money to your designated nominee following your (policyholder) death or at maturity, whichever comes early. To enjoy the benefits offered by a life insurance policy, the policyholder needs to pay premiums to the insurance provider either on a monthly or yearly basis for a fixed amount of coverage.
Why do you need Life Insurance?
With life insurance policies, you can be assured that the future of your loved ones is secure. Life insurance serves as an integral part of your financial planning, providing financial security to your family members even in your absence. The amount received from life insurance policies can be used to accomplish the following tasks:
- Pay off loan and other personal expenses such as paying for illnesses and accidents or medical bills.
- Fulfill your family's financial requirements such as financing your children’s education.
- You can take against certain life insurance policies.
- To avail tax benefits.
- Life insurance plans help you secure your retirement days by providing you with a fixed source of income.
- These policies protect your family in your absence.
Types of Life Insurance Policy
Life insurance plans are usually divided into two parts
It is a comprehensive form of life insurance that provides risk coverage for the whole life of an insured individual. In whole life insurance plans, the insurance payout is moved to the nominated individual after the death of the policyholder. The whole life insurance policies come with a savings component as well.
Term Life Insurance:
- It is a form of life insurance that provides risk coverage for a particular period of time. The term life insurance policies more affordable and flexible than the whole life insurance policies. You can choose your coverage amount, policy tenure and payment amounts as per your individual requirements.
Apart from the above-mentioned categories, there are few more sub-categories which include:
- Endowment plans: It is a combination of both protection and savings components that pays a lump sum amount after a specific term or on death of the policyholder.
- Investment-linked Plans: These plans are a combination of both investment and insurance/protection.
- Life Annuity Plans: These plans make a series of payments at fixed intervals till the time a policyholder is alive. There are two types of annuity plans - Immediate Annuity and Deferred Annuity. Annuity Life Plans are mainly designed to help retired individuals plan their finances after retirement. Life Annuities can be sold in return for immediate payment of a lump sum amount.
- Mortgage Reducing Term Assurance Plans: This is a type of life plan that takes care of the repayment of outstanding property loan amount, in case the borrower experiences permanent disability or critical illness, or meets unexpected death.
Life Insurance Riders/Additional Cover
It is an additional benefit offered by select life insurance plans. A policyholder needs to purchase the riders separately. Riders provide additional benefits at additional costs.
Top Life Insurance Providers in Malaysia:
Listed below are some of the key life insurance providers in Malaysia:
Things to consider while buying Life Insurance Malaysia:
Before purchasing a life insurance policy, an individual needs to consider following things:
- Evaluate your insurance needs.
- Find out how much cover you need.
- Know the scope of cover provided by the policy.
- Make sure you would be able to pay required premiums for your policy.
- Know about policy renewal and switching.
- Know the additional benefits riders offered by a chosen policy.
- Choose policy that best suits your possible future requirements.
How to choose the right LI Plan
- Shop carefully: Shop carefully and compare the various life insurance plans available in the market. Evaluation is very important to find the right policy at affordable premiums.
- Compare quotes: Also, you can compare the quotes offered by various life insurance companies in Malaysia. These days, you can compare and shop life insurance online. Shopping online helps by enabling you to save a lot of time.
- Opt for the top-rated companies: The top-rated companies provide life insurance policies at competitive rates and they are trustworthy.
- Read the fine print: Never purchase a policy without reading the fine print. Reading the fine print helps you understand the policy terms better.
- Check claim settlement history of companies: Check the claim paying procedure of the insurance company you have chosen, so that your nominees don’t face any difficulties while making a claim in your absence.
- Check for conversation options: If you are buying a term life insurance plan, try to find out whether the plan has a conversation option or not. The conversion option allows you to change your term plan to a permanent whole life plan.
How much life cover you need
It is advisable you choose a life cover based on your requirements. Therefore, before purchasing a life cover, make sure you know your requirements and possible risk factors. Ask yourself - “Do you really need life insurance?” “What if you don’t buy life cover? “What kind of insurance should you opt for - term or whole life cover”. Once you know the answers, go ahead and carefully calculate your cover and purchase the policy of your choice.