Everyone wants insurance. But barely anyone wants to be ‘sold’ one. This fact has exasperated insurance agents like crazy since the beginning of time.
I’ve been researching how to buy insurance in Malaysia for a while now. It started when I was in my early 20s, a good decade ago. And it’s time to compile everything I know *so far* in an article, for my own reference and yours.
Some notes before we start:
- Insurance =/= takaful, but they serve more or less the same purpose – protection. I’ll just use the term insurance for the rest of this article, lazy la to type insurance/takaful
- Yes non-Muslims can absolutely get takaful, and Muslims can get conventional insurance. No one will stop you (except the Gates of Heaven oop-)
- There are many types of insurance, but in this article we’re specifically talking about the ones for humans, not property, car, travel or pets
- I’m not an agent and my knowledge on insurance is limited, beyond what was shared to me from people in the financial industry. If anything below is wrong/inaccurate, please comment and I’ll edit
#1 – Where to buy insurance in Malaysia
You can buy insurance from:
Budget range RM100+++:
- Insurance agents – there’s like 60,000 of them in Malaysia; probably your first point of contact; they represent and sell products from ONE insurance company (representing two is uncommon, but I’ve come across them)
- Financial planners – around 1000++ of them in Malaysia; they’re able to suggest and sell insurance products from ANY company (must pay but more efficient – they suggest best plan for you)
Budget range RM100 and below:
- Direct distribution channels aka Online – They are offered on insurance companies’ websites, financial comparison websites, and for some reason, on selected e-wallets and telco platforms. This option is the most convenient but coverage tends to be low. EDIT – You can get Perlindungan Tenang from Life Insurance Association of Malaysia and Malaysia Takaful Association websites
- Government (-linked) bodies – MySalam (free; for B40), SOCSO Self-Employment Social Security Scheme (for self-employed), MDEC’s eBerkat micro-insurance options (for B40 and micro SMEs), SSPN-i (for your kids – this is an education fund with optional insurance add-on)
- More info in Best Insurance in Malaysia for B40 and M40 article
Do you *need* to buy insurance, when you can get cheap healthcare from government hospitals?
Well, if you are M40 and above, I’ll say it’s downright a moral obligation for you to take private insurance; there are solutions to fit your budget. Depending on government-subsidised healthcare means less allocation is available to those who are *actually* poor.
Please don’t burden the poor.
#2 – Which insurance provider to pick (ie which one is the best insurance in Malaysia?)
The branding of most insurance companies is more or less the same: ‘we care for you’. I have no particular preference for any of them, but if you do, then go for it. You’ll be paying the insurance company (and/or the agent) for a long time so you might as well do it without resentment.
The most important thing is to ensure that the company you pick is a PIDM insurer member. Imagine diligently paying the premium every month for years then one day the insurance company go bankrupt and poof no payout for you. Yeah avoid that situation altogether.
For most people, the best insurance is the one they can afford. Go back to #1 and pick options according to your budget range.
#3 – How Investment-Linked Insurance is structured
By default, when you look for insurance, most agents will assume you want ILP, or investment-linked insurance. More on this in #8.
If you don’t know how ILPs work, I highly suggest you read this article before continuing: Investment-Linked Products, As Explained By the CEO of Life Insurance Association of Malaysia
#4 – Picking what insurance you need
- Get Life insurance if you have people who financially depend on you, especially sole breadwinners (and, according to Mr Money TV, get this if you’re Chinese cos your funeral expenses very high compared to other races; don’t let your family get into debt just to pay this)
- Get Personal Accident and Critical Illness insurance because anything can happen and the lump-sum payment helps (living with a disability is expensive and you think you can easily work while in pain meh)
- Get Medical insurance (ie medical card) if the thought of paying high hospital bills scare the crap out of you
- The rest – hospitalisation benefit, income replacement, waiver benefit etc etc – are all nice to have, but prioritise the above first
You can get Life + PA pretty affordably, but CI + Medical insurance tends to be the budget killer. It’s okay to not get them all at one – buy what is the most important for you first then add on as you go along in life. For good measure, pray a lot for good health, exercise and eat healthy.
(Medical insurance alternative – This isn’t insurance, technically speaking, but GatherCare is a ‘medical cost crowd-sharing’ platform. Not endorsing in any way but it’s an option.)
#5 – Checking what each insurance plan exclude sucks
Check if they cover this. Check if they give you that. If not you have to pay extra later!
This is seriously one of the most annoying things when you buy insurance in Malaysia. Something that is supposed to help me shouldn’t have been this… aggravating.
Therefore, you need consultation, ie talk to insurance agents or financial planners just to make sense of it all. They are supposed to help you find the best insurance plan possible within your budget.
Of course, they don’t do this for free. They earn commissions on sales, around 25% on the premium you paid (there are tiers; won’t get into details).
I used to be dengki of this, but watching the reality TV show Selling Sunset on Netflix forever changed my impression of real estate agents and salespeople in general. Can see la the hustle, not so easy. As long as they don’t guilt-trip or mislead you, it’s honest money.
(Even agents hate fellow agents who give the industry a bad name. The ones who are too pushy with sales, the ones who say things like, TAK AMIK INSURANCE NI, TAK SAYANG KELUARGA KE?, the ones who use grisly accident pictures to sell their services, the ones who focus way too much on the investment part rather than the protection part)
#6 – Good insurance coverage with minimal exclusions costs higher than you think
Ah, the number of times I clicked on insurance ads using the text ‘From RMxx only per month’ and end up being disappointed.. 🙂 It’s like going to that sales rack in Cotton On that says ‘From RM20’ but everything worth getting is RM75 and above.
In my early 20s, I met up with an agent and asked for a quotation for the best possible insurance I can get. The most comprehensive, without excluding anything I didn’t want to exclude.
I remember the brochure said ‘From RM99’ or something like that. My quotation? RM500 per month.
Overinsured? Maybe, but I really really really wanted to avoid the ‘oh sorry miss actually your insurance don’t cover xyz’ situation at the friggin’ hospital. If I had money, I would have gotten it and ‘locked in’ that rate – they say that insurance is cheapest when you’re young.
But let’s face it, there’s no way I could afford to pay that on my salary then. I also didn’t want to ‘just get it’ and then let my insurance lapse due to non-payment.
I *could* get mediocre insurance within my budget (and this is completely fine – can always upgrade later when have more money), but in the end I picked the other alternative: I looked for term insurance.
#7 – ‘Buy term, invest the rest’
I didn’t know this when I started learning about insurance, but ‘buy term, invest the rest’ is a strategy in itself. Term insurance costs a fraction of investment-linked insurance, BUT the money is ‘burned’; unlike investment-linked insurance, you won’t get it back.
Why would one want to do that, you ask? Because you can grow the money meant for ILP yourself through business and/or investments.
However, no one said you can’t get both ILP and term insurance. This strategy suggested by MyPF makes a lot of sense.
Investment-linked for medical (to keep up with medical inflation which is at 13% rn in Malaysia); Term for life, disability & CI (to keep costs low). Travel insurance (annual) to renew only when borders reopen.
— My Personal Finances (@mypf_my) October 15, 2020
#8 – The insurance industry don’t expect you to be financially savvy
Why is investment-linked insurance the default? Because they assume you’re not that good at financial management, and it’s ‘safer’ for them to handle your investment for you and bundle it with protection rather than you doing it yourself.
I don’t blame them for assuming this. Data backs it up – Malaysians do have low levels of financial literacy. People fall for investment scams all the time. The Chairman of Securities Commission Malaysia said;
In our survey earlier this year, it shows that a majority of investors in Malaysia have an unrealistic expectation of 24% to 30% returns per annum on their investments. Please remember, if the investment proposal is too good to be true, then it probably is.
This is why sometimes you’ll face some questions or resistance from insurance agents if you specifically request for term insurance options – they’ll want to know why you want to keep investment separate from insurance (also, less commission for them perhaps). Depending on your answer, you are either really brilliant with your finances, OR an overconfident idiot. No in-between.
This is why self-awareness is important 🙂 I *hope* I’m the former, but it is absolutely possible that I’m the latter too.
#9 – Who to buy insurance from
If you have a good friend or trusted family member who happens to be an insurance agent, it’s not a bad idea to get from them – you get to support them and they (hopefully) have your best interest at heart.
You can also ask your friends and family for insurance agent referrals. If they had a good experience, you’re likely going to have a good experience too. Make sure to compare plans from a few agents. This process will likely take a while, it’s not the most efficient.
It is also possible to find insurance agents who are also content creators on social media and/or blogs. Reach out to them and ask for quotations (or simply ask out loud in social media, in my experience someone will DM you), then compare the plans and service you got. This process will also take a while, it’s not the most efficient.
The most efficient way IMO is to hire a financial planner to suggest suitable insurance plans, and review your overall finances at the same time. See 4 Places to Find A Financial Planner in Malaysia article.
(If you have multiple insurance plans, it is also not a bad idea to hire a financial planner to review everything, see if you’re over or under-insured.)
If you don’t have much money, then look for the government-assisted options. Scroll all the way up to #1.
What other practical tips on buying insurance in Malaysia that you know?
Do you have insurance? How did you get yours, and how would you do it differently if you were to do it all over again?
I especially want to hear from insurance agents and financial planners – what would you suggest we do before we reach out to you? What tips do you have for us, so that our interaction is pleasant and mutually beneficial?
Let me know in the comments section!