Tuesday, January 29, 2013


The word INSURANCE, means to insure and its main purpose is for protection, it is never meant for investments.

Even if the insurance plan name is Investment Linked, its main purpose is to provide protection, not investment.

Sadly it has been twisted to sound more like investments/savings, something the client will want to hear.

After all, how many of us are willing to listen to an agent that comes to us and talks about us dying, about us being critically ill, or about us claiming for the medical insurance?

When you buy insurance, you are actually buying the COVERAGE associated with it. You are not buying investment. The higher the coverage, the higher the premium will be.

One thing that many people are not aware of is that even though your premium is levelled, the insurance charges is not. You see, as we grow older, our RISK of claiming is higher, and so is our insurance charges.

Insurance charges goes up by age IRRESPECTIVE of when you get it.For example, when we are age 30s, our medical insurance charges may be in the range of RM 1500/year. Hence if we are paying a premium of RM 1800/year, it is able to cover for the insurance charges.

However when we are in our 60/65 our insurance charges will be around RM 3K/year. This means that the premium is no longer able to sustain the policy and the variance of the insurance charges will have to be deducted from your cash values which was accumulated throughout the years.

Once the premium + cash values is less than the insurance charges your policy will need to top up (even if you're still paying the premium) or risk having the policy lapse prematurely before the end of the term.

Disclaimer: The above illustrations is for the reader's understanding on how insurance charges works. It may vary from your policy, depending on the benefits being attached to the policy.