The right insurance is an important element of sound financial planning. Before you take it, you need to understand why you need a particular cover. Don’t just take indemnity insurance to save on tax or as a form of investment. That is why you will find most people in Malaysia under-insuring when taking a cover. It is good to understand the importance of insurance before you go ahead to get one.
Meaning of Insurance
Insurance allows you to spread a significant amount of financial risk of a business entity or individual to a large group of business entities or individuals in case a predefined unfortunate event takes place. For instance, if you take a home content insurance Malaysia, the company will pay for damages in case of fire, flooding, burglary, etc. Therefore, insurance companies spread the risk to a pool of individuals hence reducing the financial burden. Check out a more comprehensive insurance plan here!
Insurance Terminologies
The insurance company is the insurer, and the insured is the person who makes a contract with the insurance company. The amount of money that the insurer promises to pay as compensation in case of a claim is the sum assured. It applies whether you are dealing with overseas travel insurance or any other type of cover.
The compensation that the insured pays is the premium. It can be paid monthly, quarterly, annually, or on any other terms as per the contract. The premium paid is so many times lower than the amount of the insurance cover. Several factors affect the premium amount, varying from one insurance company to another. The amount that you pay for motorcycle insurance is very different from insuring a car because the risk exposure is different. Learn more here!
In the case of life insurance, the insurer specifies a beneficially who will be paid the sum assured and any other benefits. We refer to this individual as the nominee. The policy term is the number of years that you will want to have the protection. It is you as the insured to determine this term.
Some insurance covers allow you to pay extra premiums in order to access add-ons as additional features. These are referred to as riders, and buying them on the cover is cheaper than getting them separately. The last term is the paid-up value or the surrender value. If you wish to exit the policy before maturity, the amount that the insurance company pays you is the surrender value. On the other hand, if you stop to pay the premium mid-way and fail to withdraw the money, it is referred to as the paid-up value.
Types of Insurance
There are so many types of insurance that you can take. You can virtually ensure any type of risk that is quantifiable in terms of money. The most popular ones include life insurance and general insurance. Life insurance comprises things like medical and hospitalisation insurance. The policies here are many, and you can choose one depending on your needs.
Buying Insurance
There are so many insurance covers that you can choose from. Therefore, you have to be extremely careful when choosing an insurance cover. Carefully read through the policy documents and ask your agent as many questions as you can. To make the right choice, you need to;
- Know your needs
- Understand the product charges and features
- Upgrade and evaluate in time
These tips will also help you when looking for an investment insurance plan in Malaysia. You need to do your research well to ensure that the policy you take adds value to your life. The best way to do so is to follow the tips we have provided in this article.
