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6 Things About Life/Health Insurance Your Agent Didn’t Tell You

BY MK Zainal

Updated 11 Nov 2019

Insurance. Everyone thinks they should have one. Few really understand its detail. And most people eventually get one after being repeatedly nudged by that long-lost friend who texted out of nowhere because that friend just became an agent – until they gave up and quitted a year later.

But regardless of whether you already have an insurance or not, it is important for you to know its basic terminologies and offerings. Insurance is more complicated than filing up taxes (which some of you might not even do!) But you don’t want to simply put down your signature only to find out years later that you are not getting what you expected!

In this article, we are going to ask questions you never knew you needed to ask, particularly on life and medical policies. We’re gonna start with the most basic term, which is…

What's covered in this article?

1. What is a ‘premium’?

The finance world loves their confusing jargons, and ‘premium’ is one of those jargons that means different things depending on the context.

In insurance, premium simply means the amount you have have to pay monthly to the insurer.

You can choose how much premium you want to pay monthly. Do note, however, paying too much doesn’t equate to a better policy as it might cause you to be excessively covered with things you don’t need. On the flip side, paying too low might cause you to be insufficiently covered.

The best policy is the one that fits you like a yoga pants. So make sure you find a trustworthy agent that doesn’t sell you pricier policy just because they get a higher commission.

2. What happens if I never get into any accidents or illnesses?

Unlike in other countries where consu­mers ask: "How much will the family get when I die?", Malaysians want to know how much they will get back from the policy before they die.

Ain’t that the truth? One reservation that people have upon subscribing to any medical insurance is that they might not encounter any unfortunate incidents in their lives. While having an overly-optimistic view towards can get you far if you choose to be in MLM, such is not the case when it comes to health. So this is still a question worth asking – would you get the full amount that you have paid all those years?

Before we answer this, there are two insurance jargons that you need to know, which are payment term and maturity:

Payment term is the duration that you have to pay your insurance policy.
Maturity is the date when your insurance policy comes to an end.

Maturity benefit assures you to get an amount of money if you don’t claim any insurance until the end date of the payment term.

Make sure you take a look at what the policy has to offer before signing up. Some policies do outline maturity benefits as part of their plan. But other policies might not have it. In some cases, you might even lose some money if you survive through the term.

That being said, the question still stands…

3. How much money would I get if I never claim my insurance?

Here we’ll look at another jargon called sum assured:

Sum assured is the fixed amount of money that you will get upon specific terms.

When we say specific terms, it involves a lot of situations such as maturity, critical illnesses, disability, and death. In the case of maturity, some policies offer basic sum assured to celebrate your health and longevity.

But like we have mentioned before, not all policies offer sum assured. Instead, they could be a cash value policy:

Cash value policy distributes your premium into 1) Insurance coverage, 2) Fees, and 3) cash value.

To put it simply, as you pay your premium, your cash value also builds up. This cash value is the amount you can withdraw upon maturity. Some policies also offers no claim bonus.

No claim bonus is self-explanatory. If you don’t claim anything, you’ll get a bonus.

It’s not easy to say if sum assured gives you more money than cash value, or vice versa. To make things more complicated, certain policies also guarantee at least the amount of premium you have paid all these while, usually with much higher premium and certain caveats.

In a bleaker note, this also applies to death. If you didn’t die before maturity, the death benefit wouldn’t go to the people you have assigned. Instead, they will get either the sum assured or the cash value, whichever the policy entails.

However, all of these cases assume that you pay your premium till the end. What if you don’t?

4. What happens if I fail to pay my insurance?

Sometimes you get such a financial pinch that you end up not being able to pay your premium. Usually, you will first be given a grace period of 30 days to do so. If you still fail, you will lapse.

Lapse happens when you’re unable to pay your premium for a set amount of time, in which your coverage will be revoked.

The lapse can be delayed if you’re subscribed to a cash value policy, where they will deduct the amount from your cash value until it dries up. When that happens and you really lapsed, you would lose all of your money and benefits.

So consider that when choosing a policy. While you might want to choose one with a higher premium due to the coverage that it offers, take into account whether you can commit to paying them consistently for many years to come.

But apart from financial problems, you might have other reason to terminate your insurance, so…

5. What happens if I cancel my insurance early?

There are a few instances where you would want to terminate your insurance plan. You might want to look for a cheaper policy, you might suddenly receive other coverage that renders your current one redundant, or you might get proposed by a British royalty.

Terminating a policy, also called as surrendering, is quite straightforward. Upon cancellation, you would receive the accumulated cash value. Some insurance providers might charge a surrender fee that would be deducted from your cash value.

Make sure you already have other protection in place before surrendering your policy. It might not be worth it to surrender just because you want to withdraw the cash value for short-term monetary gain, as it could greatly affect your long-term personal finance. Unless, of course, you’re really marrying a British royalty.

6. What else do I need to know before I buy a life/medical insurance policy?

There are plenty of guides out there that will tell you everything about heal/medical insurance; including the types of policy in terms of protection (medical card, critical illness, disability, etc), types of policy in terms of attributes (endowment plan, investment-linked policies, mortgage reducing term assurance, etc), the premium cost, the coverage you will get, and so on.

And if those aren’t enough to make nauseous with the amount of information, you also need to ask important details such as:

  • Is there a limit on how many times you can claim?
  • Once you made a claim, how soon can you claim again?
  • If you claim a big amount (say, for disability) and get the money, would the policy still continue to give you benefits or would it terminate?

This is another reason why you need to find a trustworthy agent and build a really good relationship with them. Make them your friends, move to their neighborhood, heck marry one if you could.

Life/medical insurance is ultimately about protection for you and your loved ones

In this guide, we mostly cover questions regarding paying (or not being able to pay) the insurance themselves. It might be typical for your agent to not go over this information because other complexities of the products, but it is still important for you to know so you won’t regret your decision in the long run.

That being said, the main purpose of having insurance is still for protection, not for savings or generating money. Although most of us would like to believe in the law of attraction that we will stay forever healthy and wrinkle-free – the universe doesn’t always align. And in the case that it doesn’t (knock wood), those hundreds of ringgits you’ve been putting in every month could save you hundred thousands of ringgits to support you and your loved ones.

READ MORE: Things You May Not Have Heard From Your Insurance Agent
                        Everything You Need To Know About Getting Medical/Health Insurance in Malaysia

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About the Author

MK Zainal


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