Life insurance is like a safety net for life’s uncertainties. It works like a deal with an insurance company- you pay a set amount regularly (monthly, quarterly, half-yearly, yearly), and in return, your family gets a lump sum of money (called a death benefit) if something happens to you.
Whether it’s planning for retirement, or protecting your loved ones in your absence, life insurance is a necessary protection plan. This money is a big help for your family if you’re not around anymore. It covers things like final expenses (medical bills, funeral costs, debts) and helps your family with everyday living expenses like rent, food, and healthcare.
Life insurance doesn’t just cover death, most life insurance nowadays also provide compensation for Total Permanent Disability (TPD), to protect the insured and his/her family in the event of the loss of ability to generate income.
It should be noted that death benefits from all types of life insurance are generally income tax-free. Furthermore, you’re eligible to seek tax relief by having a life insurance policy alongside your contributions to the Employees Provident Fund (EPF).
Who needs life insurance?
Well, if someone depends on your income, like your family, life insurance is a smart move. It ensures they won’t struggle financially if you’re not there to support them.
Would they have the money to pay for your final expenses, such as medical bills, funeral expenses, taxes, debts, and lawyers’ fees?
Could they cover regular living costs like rent or mortgage, groceries, clothing, transportation, and medical needs – at least for a while?
But it’s not a must for everyone. If you’re retired or your kids are grown up and financially independent, you might not need it.
There are a few things to think about before picking a life insurance plan in Malaysia:
1. Your Financial Goals
What do you want the insurance to do?
In the absence of your financial support, would your surviving spouse manage to save adequately for your children’s university expenses or a peaceful retirement? Plus, do you have a desire to leave an inheritance for your children or grandchildren?
2. Premium
The money you pay regularly (premium) should be something you can afford. Financial experts say it’s good if your premium is around 10-15% of your monthly income. So, if you earn RM5,000, aim for a premium around RM500 – RM 750. It’s important to have a conversation with your financial planner to figure out the most suitable ratio for you, as it differs depending on individual situations.
3. Choosing the Right Plan
Different plans suit different needs. Life insurance isn’t a one-size-fits-all thing. The amount of insurance you need depends on your family’s needs. And remember, life changes, so your insurance should too. If your family grows or your goals change, your insurance plan might need an update too. Figure out the exact amount and type of life insurance that suits you to avoid ending up with insufficient coverage or paying too much for unnecessary features.
Money can never replace a person, but life insurance can offer protection during life’s uncertain moments.