“Girl, you need to buy a medical card when you start work.”
“You have to get a MRTA or MLTA to cover your house loan.”
“Remember to get a plan for Jayden boy’s education.”
“What about your retirement? Have you gotten a plan for it?”
As you step into different phases in life, you will hear these questions occasionally from your loved ones. And that little voice inside your head will tell you “Welcome to adulthood! Why do I need to buy so many plans? How do I know which is the right one to choose? Which agent can I trust for professional advice?”
Don’t be confused! These “plannings” are only to aid you in determining the amount of coverage and savings you need for different needs in your financial portfolio. You may hear of so many plans in the market but truth is, there are only 5 types of life insurance plans in Malaysia. In this article, we will share with you on the bigger picture of insurance plans for your easy understanding.
TERM PLANS
These plans have been in the market for the longest time. Like the name explains, the coverage is usually limited to a certain term only, such as 20 years or 30 years. Term plans do not give you any form of return, which means that the insurance premium that you contribute are solely for the insurance charges.
This explains why term plans are generally cheaper as they mainly cater to low-income earners and companies to get for their employees. If you have a term plan, you have to ensure that payments are made promptly or the plan will lapse easily. Example of term plans would be Standalone Medical Card, Personal Accident (PA) and Mortgage Reducing Term Assurance (MRTA).
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ENDOWMENT PLANS
These plans are basically the “savings plan” that is widely promoted by agents and banks. As a revolution to term plans, you will get a stable return of 3% to 5% depending on the company’s performance. Endowment plans are designed mainly for savings purpose with a small portion of life insurance.
They have a limited payment and maturity term. For instance, if the plan you’re choosing has a 10-Year payment and 30-Year maturity term, this means that you only need to pay for 10 years and wait till 30 years later to be rewarded.
An advantage of endowment is that with the given returns, you don’t have to worry that the plan will lapse if no payment is made (forgot to pay or financially tight). You can also withdraw your cash value at any point of time you need for emergency situations.
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WHOLE LIFE PLANS
As people commented on endowment being merely a savings plan and they need to opt for term plans for coverage, whole life plans came into the picture as a hybrid of both endowment and term plans. Whole life plans are designed with a balance portion of savings and coverage, covering up to a term of 85 years old and above. The term of coverage differs with the insurance companies. The types of coverage you may include into whole life are death, total permanent disability(TPD), 36 Critical Illness and Early Critical Illness.
Similar to endowments, whole life offers you a stable return of 3% to 5% and therefore, you also don’t have to worry that the plan will lapse if no payment is made. You can also withdraw your cash value at any point of time you need for emergency situations. Insurance premium and charges for whole life remains the same upon purchasing the plan.
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INVESTMENT LINKED PLANS
Investment linked is one of the most popular plan in the market recently. These plans are widely used in planning your medical coverage and Mortgage Level Term Assurance (MLTA). As medical card only comes in term plans or investment-linked, the latter is definitely a better choice for the price and flexibility of the plan. You are allowed to choose the proportion of insurance coverage and investment with your given budget.
In addition, the return that you receive from your investments can help to sustain the plan if no payment is made and you can also withdraw them for any financial emergency. Unlike endowment and whole life, the cash value in investment-linked plans are invested in investment funds of your choice. This gives you the opportunity to gain higher than 6% but it also means that there are chances of losing your investments as well. Therefore, to maximize your returns, it is advisable to monitor your fund performance from time to time and switch your funds accordingly.
Conversely, do take note that the insurance charges for the benefits attached to investment-linked increases according to age. Your cash value will be used to maintain your premium, therefore, you need to ensure your cash value is properly invested. If the cash value is insufficient to maintain the plan, company has the right to increase your premium.
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UNIVERSAL LIFE PLANS
Universal life plans are a hybrid of whole life and investment linked. In short, you have both portion of whole life’s stable return and also investment-linked’s opportunity to gain higher returns in its investment funds. This is to suit people with medium risk appetite. However, universal life plans are not as popular in Malaysia yet, hence, you may find limited options in terms of coverage to choose from.
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The different types of plans are available in the market to cater to different needs. It is more important to analyze your current financial portfolio prior to buying a plan. A proper planning is vital to avoid redundant purchase which may result in the common problems faced by people – insufficient claim or the inability to claim for certain medical risk. Click here to know more on planning a proper medical coverage and here to read on uncommon facts on medical card.
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