Protect Well

PROTECT WELL

Insurance Blunders to Avoid

29 May 2020

3 mins read

Choosing the right insurance policy can be a daunting task for most of us. It's not like buying a chair or a shirt or groceries. When you buy insurance, you're buying a promise. It's a promise that if something happens to you or your loved ones, insurance helps meet the costs.

However, there are many insurance products out there that come in a variety of forms and some plans are merged with other products to help you save money or grow your wealth. As such, it's easy for many to get confused or make a mistake when choosing an insurance plan. Here’s some common blunders to avoid.

Not having a clear objective

Before purchasing a policy, always ask yourself why you are purchasing the policy. There are several reasons that people buy insurance policies:

Protecting your loved ones against your death
Protecting yourself against permanent disability or critical illness
General medical protection
Forced savings and wealth generation
Planning for retirement
Planning for your loved ones future
Protecting your home or business

It's important to know what your priority is and what you want out of your insurance policies and don’t be afraid to have multiple objectives because many insurance companies in Malaysia nowadays let you choose and customise the right policy for your objectives.

For example, if the reason you're looking to get insured is for protection, then a savings policy isn't what you're looking for because most of the insurance premiums paid will go towards a savings component. Instead, you should consider an income protection plan or a whole life insurance plan to ensure that your interests and those of your loved ones are secured. So, think through your objectives and list them down by importance to ease your decision-making.

Delaying your purchase

Buying health or life insurance is not something you want to put off. Yet many wait too long to get it, either due to a lack of awareness or it just not being a priority. According to Bank Negara statistics in 2018, only about half of Malaysia’s working population have some form of insurance.

Delaying the purchase of your insurance can dramatically increase costs. The reality is that your best chance of getting an affordable rate on your coverage is when you're young and in good health because policy premiums are going to go up if you develop health conditions or when you get older.

Too much coverage

A common blunder many make when it comes to insurance is over insuring oneself. It can be difficult to determine how much basic insurance you really need. If you are starting young, you will not need as much insurance, since you do not have as many assets.

There are people who are insured but don’t know what they are paying for. Sometimes, they buy coverage without understanding what’s important to cover first, which can lead to overlapping coverage or unaffordable premiums.

A life planner would be the best resource to give some advice and put you in the right direction with what you want to from your insurance policy. Otherwise, you can also do your own research online because there are plenty of reliable resources online.

Too little coverage

On the flipside, there are also those who under-insure themselves and it can be quite costly when you realise that your basic insurance will not cover your much needed expenses. Check your policy properly and consider the maximum amount your insurance will pay on your claims.

If you have health insurance, you should consider the maximum amount your policy will pay. You may think your current coverage may seem sufficient, but if you were diagnosed with cancer or another major illness, the costs of care might exceed that amount. According to a survey done by the Ministry of Health, the cost of treatment for breast cancer is approximately RM395,000 in a private hospital. Considering the rising costs of medical treatment now, sometimes in the area of your health, more is better than less.

Basing the quality of the policy on premium prices

The best policy is one that suits your needs like a glove. If you have to compare prices, compare only between comparable policies that have already been customised to suit your needs, not which one is cheaper, or which one is the most expensive. While you shouldn’t delay your purchase for long, you also shouldn’t rush into it as insurance is akin to a long-term investment.

Finally, once you’ve decided that you are ready to commit, read your policy and understand all the clauses and coverage that you are entitled to. As said earlier, there are many factors you should consider before buying an insurance plan. If you need help, life planners are always ready to help you navigate your needs and understand which policy suits you best. Life planners are active partners in their customers’ life journey and they exist to help you avoid pitfalls when purchasing an insurance policy. For more information, you can check AIA’s various products here, or have them help you choose the right policy for you.

References

https://www.ibanding.my/5-mistakes-when-buying-health-insurance/

https://www.fundsupermart.com.my/insurance/article/3-dangerous-mistakes-you-dont-want-to-make-with...

https://loanstreet.com.my/learning-centre/7-common-mistakes-people-make-with-life-insurance

https://loanstreet.com.my/learning-centre/think-twice-about-being-uninsured

https://www.thestar.com.my/news/nation/2016/01/03/we-dont-have-enough-most-malaysians-will-struggle...

https://www.theedgemarkets.com/article/cover-story-tackling-challenges-headon

https://www.imoney.my/articles/is-your-medical-insurance-plan-sufficient-for-the-big-c

The above articles are intended for informational purposes only. AIA accepts no responsibility for loss, which may arise from reliance on information contained in the articles.