Planning for uncertainties: Why you need insurance

When you make a financial commitment, such as purchasing a house by borrowing money from a bank, you have locked part of your future income. Should there be an unfortunate natural event (death or disability) or an economic catastrophe (retrenchment), where your ability to meet these commitments have been impaired, the possibility of losing your hard-earned asset is real.

There is a financial instrument that you can purchase to protect you from such an eventuality – insurance. It is a means of giving you a financial buffer or protection in case something happens to you, your family or your belongings.

In offering you such protection, insurance is providing you with peace of mind. The money you put towards insurance will enable you to:

1. Repair damages to your personal belongings or to replace items that had been stolen (provided such items are insurable)

2. Pay for medical bills when you or your family members are hospitalised

3. Take care of your monthly living expenses, debts and financial commitments when you are not able to work due to a serious illness or an accident

4. Provide some financial support to your family in the event of your disability, serious illness or death, particularly if you are the breadwinner of the family.

Upon payment of a relatively small fee (known as a premium), a licensed insurance company will replace items lost or damaged due to an insured peril, such as fire, accidents and theft. However, these incidences must occur during the insurance period up to the limit of the sum insured.

The insurance company sells policies to thousands of people and the premiums collected becomes part of an insurance fund.

Not all who pay the premiums will be affected by misfortune and when some do, they are not affected at the same time.

The insurance fund helps all those who contribute to share risks. The insurance industry in Malaysia is regulated by BNM. To help the public know more about insurance, BNM has produced a series of booklets, which you can get from branches of insurance companies.

Buying an insurance policy is an important decision. You must get as much information as possible before making up your mind on the best option that would fit your lifestyle.

It is very important for you to know the following:

1. Types of policies that are available, especially their features and benefits 2. Perils and risks covered 3. Terms and conditions, including pre-existing conditions and exclusions that are not covered

4. Amount of premiums that you must pay in relation to the sum insured, risks covered and period of coverage

5. Situations that allow you to make a claim and how you can make such a claim.

All life and general insurance policies or certificates state all the terms and conditions between you and the insurance company.

For life insurance, the premium depends upon a combination of factors, the main ones being your age and health. The older you are when you purchase a life policy, the higher the premium you must pay. This is because the insurance risk for your life is higher. How much should you insure?

All insurance premiums are paid in the name of the insurance company and not in the name of the agent. Always buy insurance that gives you the greatest coverage and meets your needs at the lowest premium cost. You do not want to pay too much in insurance premium to the extent that

The amount of life insurance to buy depends on how much money you need when you are critically ill or disabled due to an illness or accident. It depends on your lifestyle, living expenses, financial commitments and obligations.

If you are buying life insurance so that there will be some money for your family in the event of your death, you will have to decide on the amount of money your family will need to live without you.

You do not want to have too much or too little insurance. Your goal is to get enough or the right amount to help you meet your financial commitments in times of need. Buying insurance

Buy only from insurance companies that are licensed by BNM. When seeking advice, ensure that the financial advisor, or broker is regulated by BNM and is a member of the Malaysian Insurance and Takaful Brokers Association.

If you are buying life insurance through an agent, he or she has to be appointed by a licensed life insurance company and registered with the Life Insurance Association of Malaysia.

A general insurance agent must also be appointed by a licensed general insurance company and registered with Persatuan Insurans Am Malaysia.

It pays to shop around. Use the Internet, read the product brochures, talk to people who have experience in buying insurance policies.

Insurance is generally bought for protection against unfortunate events so that you or your beneficiaries will not be in serious financial difficulties. Making a claim

When making a claim, you must prove that the event you are insured against did happen. Be sure of the requirements of the insurance company.

For example, if an insured’s personal belonging has been stolen, one of the documents you will need to provide is a police report.

What is important is that you must notify your insurance company as soon as possible after the occurrence of the unfortunate event. The process will be quick if you produce all the necessary documents when filing your claim.

The Credit Counselling and Debt Management Agency (AKPK) is an agency under Bank Negara Malaysia tasked to help individuals take control of their financial situation. For assistance, please contact AKPK’s Power Infoline at 0326167766 or visit www.akpk. org.my.