Hi All

Just want to share with you guys some information on insurance

1) Everyone should have a life -insurance that covers medical, hospitalization etc. The amount of insurance is strongly related to your gender, age, income. If you are fresh from the university, with your meagre income, you can afford to have a basis policy only. As you grow in your career, you can top up or get another policy.

2) Another popular product promoting by insurance companies is children education. Generally it works this way. You pay certain amount of RM, your child will get protected and in return you get XYZ after number of years.

My personal opinion is this product is absolutely diverted from the original objective that is children education. Here is why
a) You pay premium for the insurance policy, so that you can have a lump sum when your child needs the money in let say 15 years time. The amount you paid will be compensated with a 4% max return(refer below)

b) If you invest the same amount of money in other investment (Certain risks), you can get more that 4% return in average...(Diclaimer here)

c) For your child protection, you absolutely do not need this. If you child is no longer around, why you need this insurance money for. I am sure everyone want their child to grow up in a health situation. Hence the argument that life insurance bundle into children education is redundant. You are paying for the agent commission.

PLEASE TAKE NOTE THAT INSURANCE IS PURELY MEANT for protection. As the industry grows, insurance companies came out with variety of products that bundle saving, retirement, education to allow agents to earn commission and survive. As far as we as a consumer is concerns, you buy insurance for protection, i repeat protection. If you objective is to saving, or retirement or children education, kindly look at other investment tools like unit trust, shares, gold, etf etc. which can give you many times return that your insurance policy...

Under Insurance Act 1996, Bank Negara has a very stright control of the premium received by the insurance companies. For life insurance premium received must be in a tabung called Life Fund for the company. For others it will be in another tabung called Investment Fund. These two tabungs exist in all insurance companies in Malaysia. For Life Fund, Bank Negara strictly stated that insurance companies needs to invest majority of the premium received in MGS and bonds that are very safe (giving a return of 3-4%). On the other tabung which is the Investment Tabung, insurance companies are strictly prohibited to invest in unregulated products.. Rata-rata they invest in KLCI and again MGS (M'sia gov bonds).

IF you understand this structure, there is no way, insurance company can give you 7-8% of return in your policies. they can only give you max of 4% or less..........Hence that is why if you want protection go to insurance, if you want to save for your retirement, saving, children education, go to invest in other methods.

Cheers
Andy

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I coming from this angle.

Is the parent that needs to buy the insurance for his family hence that the first step is to protect the main breadwinner (mother or father). That is why 1st step of any financial planning is to make sure that the bread winner is well -covered before even talking about other things like retirement, children education and others.

If the breadwinner no longer around the insurance money received can help the child(ren). End of story.


With this point, we need not buy insurance for the children. Why you need to pay endownment that covers the child? Well i suggest you buys life insurance for your child, and tranferred to him/her when she reaches age of maturity or when she/he comes out to work.He/she can continue from there onward...


cheers