The Beginner’s Guide to Insurance in Malaysia

Stripped to its most basic meaning, insurance means protection against an unwanted event. An insurance policy covers you financially if/when said events occur, but there is more to it than just purchasing a coverage.

There is also no one insurance policy that covers every single risk to your health, life, and properties, so it is important to know how to navigate the world of insurance!

How Does Insurance Work?

When you purchase an insurance policy in Malaysia, like most countries, you pay what is known as a “premium” to the provider. Premium is usually paid in installments, but some may require upfront payment in full before coverage begins. In return the provider will give out financial compensation depending on the intended coverage.

As you learn more and more about insurance, you’ll find out that many things can be insured, but not all are applicable to you, whereas some are highly critical and even compulsory by law.

A List of Common Insurance

1. General Insurance

• Motor Insurance: Vehicle owners are required by law to purchase a third party motor insurance.
• Travel Insurance: A small payment as low as RM 10 insuring a trip against inconveniences like flight cancellations and missing baggage. Protection can potentially save you up to hundreds of thousands of Ringgit.

2. Health Insurance

• Medical Insurance: This is the most common insurance, and for good reason. It reimburses the cost of in-patient hospital treatment and medical expenses. It’s a smart move to prioritise medical insurance.
• Critical Illness Insurance: Provides a lump sum payment to the insured or beneficiaries upon diagnosis of a critical illness, which helps cover recovery expenses and loss of income.

3. Life and Personal Accident Insurance

• Term Life Insurance: If the insured dies or suffers a permanent disability during policy period, beneficiaries receive a payout. Timeframe is usually 10, 20, or 30 years.
• Whole Life Insurance: Similar to Term Life Insurance, but covers the insured’s entire life. As expected, the premium is significantly higher because payouts are guaranteed.
• Personal Accident Insurance: Provides protection for death, disability, and medical expenses from an accident. The coverage is more limited as benefit is limited only to accidents.

Other Types of Insurance

Some types of insurance have savings or investment-linked policies. On top of the standard coverage, the policy might come with additional features such as guaranteed cash payments, dividend payouts, or a maturity benefit.

You can also choose to purchase housing insurance. It is exactly what it sounds like – an insurance policy for your home and belongings against a set of undesired scenarios.

Picking an Insurance Plan

First off, determine the level of protection you “want” and “need”. You don’t absolutely have to purchase every available insurance out there. One thing is for sure though, the better the coverage, the higher the premium, so be sure to measure and think that through when going through different plans.

A sensible strategy is to get basic plans first, as you start earning more, or when your family grows, you can dive deeper into additional coverage options.

The Bottom Line

In essence, everybody will need insurance sometime in their lives, but the degrees vary. If in doubt, you can always get the advice of insurance advisors to protect you, your family, and your assets.