Insurance is always sold, not bought.
How many of you really wake up one day and say, “Hey, today is a great day, lets buy insurance?”
Let’s face it, insurance is probably one of the last things in mind especially you have not met with any unfortunate event.
When we were sold with an insurance plan, we always rely on the advice whomever is selling it to you.
My first insurance…
…was bought over a phone call. It was a bank that called me selling me a hospital income plan. Now that I am a planner, that was the second worst advice when it comes to insurance. I wasted thousands of ringgits on that insurance.
(the worst advice is selling an insurance saving plan to young working adults)
How many of us really stop and think whether is this the correct protection plan for me?
I don’t blame you, non-insurance people.
Insurance is a very complicated product, even senior agents and financial planners can not understand or memorise every single product in the Malaysian market, let alone offshore insurance solution. There are many advanced solutions for people with different needs.
“How many of us really stop and think whether is this the correct protection plan for me?”
However, that is not the purpose of this article. In this article, I want to cover a relatively simple insurance, but because it was not sold, not many people bought.
If you are reading this, there is a very high chance that you are a young working adult (below the age of 40).
According to the Department of Statistics Malaysia, the principal causes of death for the age group of 15-40 is transport accidents.
So, my question is, how many of you have adequate Personal Accident plans.
What is a Personal Accident insurance?
A Personal Accident insurance (or PA) is a type of insurance that provides protection if the insured met with an accident.
Can I claim PA if I die due to natural reasons?
No, you can only claim from a PA if you meet with an accident
So why should I buy a PA since I can only claim only when I meet with an accident?
Reason #1: Cost Effectiveness
As a financial planner, I always advocate using the lowest possible premium to provide you with the highest possible protection.
Very often I would recommend my clients to go for a standalone medical card and use the saving in premiums for other investments (btw, investing is so easy nowadays with more and more fintech players coming into the picture).
A PA is another insurance that most people, especially if you drive daily, should buy because it is relatively cheap to get.
To get a RM 500,000 term insurance will set you back around RM 1,000 a year, and this premium will increase as you age.
However, if you get a RM 500,000 PA, the premium is only RM 650 a year, and this premium will stay the same no matter how old you are.
Reason #2: Serious but not so serious claims
I get this a lot. “Since my life insurance covers death and TPD (Total and Permanent Disablement), why should I get another PA insurance?”
Yes, there will be an overlap coverage if it comes to death and TPD due to accidents. However, not all accidents will result to death or TPD.
What if we lost our entire arm, and will this affect our likelihood to work for life (read: dentist, surgeons)?
So, if you have a normal coverage for death and TPD, it will not pay-out any benefits unless we lose at least 2 of our limbs. But for many of us, losing the entire arm will affect our work, one way or the other.
A PA can cover smaller incidents like the loss of a finger or a thumb. If you do not have PA, your living lifestyle is going to take a huge hit, especially if your lifestyle is funded by mountains of debt that can only be paid if you are working.
Reason #3: Priorities
Insurance is all about chances and probabilities. Which do you think has a higher chance of happening tomorrow, an accident or cancer?
Don’t get me wrong, critical illness is also an important coverage to get. But if you are tight on your budget, and can only choose one before another, which would you choose?
Reason #4: Other benefits
A PA doesn’t only cover Death and TPD due to accidents, certain companies also provide an attractive plan that includes other benefits such as:
- Medical Expenses
- Snatch Theft Compensation
- Hospital Income
- Kidnap and Reward Benefit
- Funeral Expenses
These are just some examples and the benefits vary from company to company.
“Which do you think has a higher chance of happening tomorrow, an accident or cancer?”
PA are usually offered by General insurance companies, and your agent is very likely an agent of a Life insurance company, hence they may not have access to plans like this. And since a PA is a relatively low premium insurance, the profit margin of this plan may not be as high as any other plans (hint: saving plans).
However, after reading this article, I hope I gave you enough insights to start planning for your own insurance. If an agent doesn’t sell it, doesn’t mean it is bad. Check out direct term insurance also, they are very good for protection at a low cost, and commission free.
How much PA protection do I need?
As a general rule of thumb, get at least 3-5 years of your income as the sum assured. Say if your income is RM 5,000, you can get a PA that covers around RM 300,000 (RM 5,000 X 12 months X 5 years). This will only cost you around RM 400 a year.
I need professional help. Who should I talk to?
I offer independent insurance review, but unlike most people, I don’t do it for free. I charge a fee because I don’t want to give free advice in the hopes of selling a plan you do not need. You can check out my insurance review service HERE.
Engaging someone independent (like me!) to review your insurance could potentially save you thousands if not tens of thousands every year.
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