RM 250x12= RM 3,000.00 all get LHDN tax relief? NO!

Only the portion that pays for the protection (pure insurance part) is eligible for tax relief. Usually around RM 400 - 500.

The other portion that is used to but into unit trust fund are considered as investment and hence not eligible for tax relief.

But, fret not, just buy a medical card and critical illness and voila... tax relief is yours again. T&C applies. A pure critical illness policy alone would already exceed the RM 3,000.00.

Truth be told, the RM 3,000.00 is too little because a critical illness policy nowadays will be >RM 3K even for a sub-decent coverage. This RM 3K, hasn't taken into effect the rising medical inflation.

This leaves very little room for any child edu tax relief.

My opinion, it should be RM 3K for child education RM 6K for medical.

Xuzen

This post has been edited by xuzen: Mar 11 2011, 01:53 PM

To put things into perspective, an child education fund is basically an endowment type policy. Endownment because you are insuring an insurable interest's life within a fixed period of time.

I googled non-par education endowment and no satisfactory product crop up. My guess is that insurance providers are not offering it for some reason or other.

If you put in RM 3000 premium per year, do not expect all RM 3K to be tax dedictible because you can only claim tax relief on the insurance part.

For insurance to work, you must be insure a insurable interest (in this case your own child) hence in an education policy the legal owner is the legal parents and object of insurance is the child. It is just to satisfy the requirement of Insurance Act 1966.

The parents life is insured as a rider to waive the premium payment incase the payor/parents predecease the life-insured. This is important because in the unfortunate event that the parent predeceased, we must assume that the minor will not have the financial capability to pay the remaining premium.

If you name your child (minor) as beneficiary, he/she will not be able to use the money until 18y/o. The money will be parked at Amanah Raya Bhd (Public Trustee). If you name another person other than spouse or child, then the nominees can only act as a trustee (sec 167 of Insurance Act 1966).

Best is to name spouse as primary nominees and alternative nominees as trustee (can also name private company trustee such as Rockwills or OSK Trustee or ARB) incase both parents predeceases the life assured.

Hope this help.

Xuzen