What to Look Out for When Buying Insurance?

Insurance is a product you pay for that offers you protection should something unexpected happen to you. The most common types of insurance are medical insurance, life insurance, motor insurance, and home insurance. Since your needs will change as you get older, you may need to buy different types of insurance at different times in your life.

Guide

Summary

Which insurance products do you need?
Important things to keep in mind when purchasing insurance
What ‘catches’ should I look out for?
Using Insurance Agents or Brokers
Additional resources

WHAT TO LOOK OUT FOR WHEN BUYING INSURANCE

Which insurance products do you need?

You may not need all the insurance products there are on offer, and it may be expensive to pay for so many insurance premiums. So, decide which ones you really need based on your situation.

Here’s an overview of the different types of insurance products available:

	Term Life	Whole Life	Critical illness	Medical	Auto	Property	Travel
Purpose	Replacement for expected income if policyholder dies	Replacement for expected income if policyholder dies, and wealth transfer tool	Coverage for critical illnesses, total permanent disability, or death	Coverage for medical treatment	Coverage for auto accidents and 3rd party claims	For theft and damages to home	Injury and death during travel,and involuntary travel plan changes
Coverage	Expected income losses	Expected income losses; payout equivalent to premiums paid	Expected income loss	Surgery and hospitalisation (including public hospitals); critical illnesses; long-term care	Theft and fire; property, personal injury and death in own vehicle; third party property, personal injury and death	Theft of furniture and belongings; damages from fire and adverse weather	Death benefit; surgery and hospitalisation; travel plan changes
Suitable for	Working individuals, parent/carer	Working individuals	Working individuals, individuals with families	All individuals	Car owners and their family members	Home owners	Travellers and their family members
Factors affecting Premium	Age; existing conditions; coverage relative to existing income; number of dependents	Age; existing conditions; coverage relative to existing income; number of dependents	Age; gender; smoker/non-smoker; expected insurance payout	Age; existing conditions; lifestyle factors; previous medical history and claims; whether cashless or reimbursement-based	Vehicle value; driving experience of holder; accident history and previous claims	Property value; furniture value; fireproofing of home; previous claims	Travel location; travel duration
Term Length	5-40 years from purchase	Until death	Until age 85-100 or death	Until death, or specified illness/age	1 year	1 year	Duration of travel, up to 1 year
How to Buy	Agent; broker; online	Agent; broker	Agent; broker; online	Agent; broker; online	Agent; broker; online	Agent; broker; online	Agent; broker; online

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Medical insurance
Medical insurance covers the cost of medical treatment at a private hospital that you might not be able to afford otherwise. It’s better to get medical insurance while you are still young and don’t have any prior medical conditions that may prevent you from getting coverage. Check out our article on Medical Insurance for more information and tips on how to pick the right medical insurance for you.
Life insurance
Life insurance provides a sum of money to your dependents (like your children and spouse) in the event of your death or if you become permanently disabled. This is an important insurance to consider if you have a family or are planning to start one.Check out our article on Life Insurance for more information and tips on how to pick the right life insurance for you.
Motor insurance
Motor insurance provides coverage for repairs in the event that your vehicle is damaged in an accident, or if you caused damage to another vehicle. The insurance premium is usually paid annually when you renew your road tax and the cost is calculated based on the value of your vehicle.Check out our article on Motor Insurance for more information and tips on how to pick the right motor insurance for you.
There are also other types of insurance that you may not need right now, but keep them in mind in case you will need them in the future:
- Fire insurance is a type of home insurance that protects your home against loss or damage due to unexpected events such as fires, lightning strikes, or gas explosions. As your home is probably your biggest investment, it makes sense to have it insured.
- Personal accident insurance provides you with coverage for injuries, death, or permanent disability caused by accidents. This insurance would be suitable for people with dependants whose work involves manual labour or the operation of machinery. You should check whether your employer provides personal accident insurance for you.
- Travel insurance provides compensation for injuries or losses suffered while travelling. It doesn’t cost much to purchase insurance for a single trip so be sure to get travel insurance when you plan a trip overseas. This can be purchased online or through your travel agent.

Important things to keep in mind when purchasing insurance

Figure out what coverage you need and make a note of exactly what will be covered by your policy. Don’t over or under-insure yourself
Always check and be aware of what your policy will not cover (exclusions)
Pay your premiums on time and follow all the terms and conditions to ensure that your policy will be valid when you need it
Know the claims procedure so that you can act quickly when unexpected events happen

What ‘catches’ should I look out for?

First, all insurance policies will place a limit on how much you can claim. For life and medical insurance, these show up as annual and lifetime claim limits (the total length of the policy). You can have medical insurance with big lifetime coverage numbers, but that’s no use in a bad accident if you have a small annual limit!

Annual and lifetime limits as they appear in insurer material

“The Annual Limit shall increase by 5% on the starting Annual Limits every 2 years, beginning from the 5th year, for the next 15 years”

“’This policy has no Lifetime Limit, and an Annual Limit up to RM2 million!”
Second, many policies, especially medical and motor insurance, will also have deductible amounts (also called ‘co-pay arrangements’ or ‘excess amounts’). This means that you’ll still need to pay something when you get your car repaired or visit a doctor, before the insurance company will bear the cost for you.

Deductible amounts as they appear in insurer material

“You must bear the first 2% of the Sum Insured or RM400 (whichever is higher) for each and every claim arising out of one transit for every claim payable”

“We have the right to deduct RM400 as Compulsory Excess if at the time of the Incident the person driving the car is not named in the policy as a Named Driver”
Finally, exemption clauses explain what insurance companies will and will not cover. For example, many medical policies won’t pay for baby delivery and maternity care costs.

Exemption clauses as they appear in insurer material

“General exclusions include alcoholism, addiction and/or intoxicants caused by alcohol abuse or use of narcotic or hallucinogenic drugs”

“Experimental treatment, including therapeutic procedures which have not yet had their reliability recognised by the international medical community”

“There have been incidents of civil unrest in Hong Kong. We will treat claims that arise from such unrest from travel policies bought after 14 August as “known events”, which are therefore not covered”

Using Insurance Agents or Brokers

Many people pick their insurance companies based on tips from friends – some of whom may also be insurance agents! It’s tempting (and comforting) to think of them as friends, but be sure to pick your insurance agent/broker carefully!

In Malaysia, all life agents can only sell products for 1 insurance company, while non-life agents can sell products for a maximum of 2 insurance companies.

Insurance brokers on the other hand, represent you and can source insurance products from many different insurance companies for you. You can then decide which insurance product suits your budget and needs the best. This might save you a lot of time and effort.

Here are some questions to ask your insurance agent/broker:

What conditions/circumstances are not covered by this policy? Be very clear about deductibles, exclusions, limits and anything else which is not covered.
Is renewal for this policy automatic? And what cancellation charges apply if I surrender my policy?
What happens if my circumstances change and I have difficulty paying; e.g. if I lose my job?
Aside from coming to the end of the policy term, what other factors might cause my policy to end/be terminated?

Here are some things to be careful about:

Don’t purchase more coverage than you need: some agents/brokers may try to sell more life insurance coverage than people need, or push comprehensive medical plans on young or low-risk consumers.
Don’t purchase whole products that you may not need: some agents/brokers may sell you whole life insurance because it has both insurance and investment benefits. Whole life products only give ‘expected returns’, which might leave your loved ones with less money than expected, so make sure you are aware of the risks before opting for a product like this.
Don’t rely on everything an agent tells you: all insurance agents/brokers have to take an exam before working, but they won’t be experts on all financial topics. Always do your own research and don’t rely purely on what your agent tells you.

Besides selling, agents/brokers are also supposed to provide you with assistance on an ongoing basis so don’t hesitate to ask them questions about your policies. It’s also not rare to get a replacement agent/broker if your original one leaves the insurance or brokerage company.

Additional resources

To help you compare policies and keep track of important details, we’ve prepared a quick template for you to fill up as you conduct your research.

Insurer & Policy	Policy 1: _____________	Policy 2: _____________	Policy 3: _____________
Quoted Premium
Policy Term
Coverage
Stated Exemptions
Optional Riders
Other ‘Catches’
How to Buy