Invest in your health at the first opportunity

The rising number of heart disease, cancer and TB cases is the reason to prepare for the unknown

by MARK RAO/ pic by BLOOMBERG

IT IS a common misconception among many that we do not need a life policy or health insurance when we are at the prime of our health, and more so when there is the government-backed health service option at hand for all.

For a millennial who is just starting work, but is saddled with financial commitments such as student and car loans, paying towards a life policy is far from his or her mind.

After all, the young ones have low risk of falling critically ill or having to undergo serious medical treatment while still in their 20s and 30s.

This is precisely the time to buy a life or health insurance and hold on to that policy when your health is at risk, according to a local insurance agent with over 40 years of industry experience.

“The trick to insurance is always health. Insurance premiums are at the lowest when you are healthy, whereas you will be faced with loaded rates when you are not in the best of health or have higher risks,” the agent who asked to remain anonymous told The Malaysian Reserve (TMR).

The rising number of heart disease, cancer and tuberculosis (TB) cases in Malaysia is an example of the need to prepare for the unknown as these diseases do not discriminate by age or gender.

TB cases are made more complicated due to increasingly mutated strains being observed recently. A total of 25,837 TB cases were recorded last year in the country.

Diabetes is also on the rise, with the Health Ministry reporting that some 3.6 million Malaysians are living with diabetes today — the highest rate in Asia.

Worryingly, it is estimated that seven million Malaysian adults are likely to have diabetes by 2025. Cancer is another killer that is becoming common in this day and age.

While companies generally provide some level of health coverage for employees, the scope of the policy may be limited and may not provide the coverage needed.

Paying out of pocket for private healthcare is not feasible for the vast majority of Malaysians, while national hospitals, though affordable, are often overcrowded with disproportionate doctor-to-patient ratios.

Finding the best policy that suits your needs and affordability requires going beyond window shopping. A good place to start is differentiating between a medical card and critical illness (CI) insurance.

The insurance agent said medical cards work via reimbursement, while CI is an example of indemnity.

“With a medical card, whatever medical bills borne by you will be reimbursed. For indemnity, you are paid a lump sum regardless of how much the medical bill comes up to,” he said.

Note that CI or dread disease insurance is a form of medical and health insurance that provides policyholders with a lump sum payment when diagnosed with any of the 36 defined illnesses.

This includes heart attacks, coronary artery bypass surgery, cancer and kidney failure.

“When you have a heart attack, for example, you will not be as active as you were before,” the agent said.

“At the same time, you still have liabilities and ongoing expenses. Indemnity coverage is geared to assist you in these times.”

While reimbursement and indemnity are two separate clauses, an individual can ask for a policy that includes both a medical card and CI coverage, the agent added.

Paying towards a life policy requires setting aside an amount to pay for the monthly (or other periodic) premiums and this amount should not exceed 15% of your income, according to the agent. This comprises both medical card and CI coverage, he said.

“About 10% of your income is what is typically recommended, but if that amount does not provide the coverage sought by the customer, then we advise the amount paid does not exceed 15% of income,” he said.

“Any more than that, you will have a hole in your pocket.” Unfortunately, in times of fiscal constraint, life policies are often what is first sacrificed, he noted.

According to a check on RinggitPlus.com, a 28-year old male earning RM2,880 monthly — the mean wage earned by Malaysians in 2017 — who smokes one to 10 cigarettes a day can secure monthly premiums ranging from RM28.33 to RM91.10.

This is for a coverage amount of RM200,000 for 25 years.

On the other hand, a non-smoker who meets other criteria can secure lower monthly premiums of between RM24.82 and RM67.44.

Another senior insurance agent said every individual should invest in a life policy as soon as he or she can afford to do so.

“It is a priority and a means to prepare for the unknown because anything can happen to you at any time,” the agent told TMR.

“Through a life policy, you will have access to a medical fund (via a medical card) which is the cheapest way to pay for medical costs. It is also a protection in the unfortunate occurrence of death or permanent disability.”

He added the medical and CI policies are usually a savings policy whereby you pay insurance charges, while also contributing to a savings account which you can make partial withdrawals throughout the tenure of the policy.

“For the medical and CI coverage, there will be a policy review every five years which can result in a change in premiums paid,” he said.

“But for policies covering death and permanent disability, you pay a level or fixed premium throughout the coverage.”

Note there is also microinsurance available for those who cannot afford traditional policies in the market today, while investment-linked life insurance products are an opportunity for those looking for both protection and investment elements.

In its latest budget tabling, the government announced a tax relief of RM3,000 for life insurance premiums, as well as a stamp duty waiver for low-premium “Perlindungan Tenang” products. According to the Life Insurance Association of Malaysia’s latest findings, only 54% of the Malaysian population is covered by life insurance or takaful plans.

Taking into account policyholders with more than one life or takaful policies or certificates, this means only 34 out of 100 people are insured. It is also understood that the majority of those currently insured are still considered underinsured.