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TOP 5 QUESTIONS YOU SHOULD ASK YOUR AGENT BEFORE BUYING A POLICY



Inspired by KC Low’s YouTube posting on the same topic and writing this from an agent point of view :)


And everyone knows buying a policy is a long term commitment and these are top 5 questions you should ask your agent before buying a policy.


#1 WHAT TYPES OF INSURANCE ARE AVAILABLE?

There are 4 types of insurance coverage, and they are:

1️⃣ YOU DIE, I PAY refers to LIFE INSURANCE coverage

2️⃣ YOU FALL SICK, I PAY refers to CRITICAL ILLNESS benefit and/or MEDICAL CARD

3️⃣ YOU RETIRE, I PAY refers to RETIREMENT FUND

4️⃣ YOUR KIDS GO COLLEGE, I PAY refers to KIDS EDUCATION FUND


#2 HOW MUCH COVERAGE SHOULD I BUY?

There’s a few ways of calculating how much coverage a person needs. The coverage depends on your current salary. The simplest way to gauge is like how a doc would advise you how many glasses of water you need to drink daily: 7 - 8 glasses of water. 


Likewise in insurance coverage, the simplest way of calculation for the types of coverage you need.



So if you are earning RM100,000 per year, your insurance coverage should be:-

Life insurance: RM100,000 x 10 = RM1,000,000

Critical illness: RM100,000 x 5 = RM500,000

Retirement: RM100,000 x 20% = RM20,000/ annum

Kids Edu: RM100,000 x 5% = RM5,000/annum


#3 HOW CAN I GET THE MOST COVERAGE FOR THE LEAST AMOUNT OF PREMIUM?

Depending on your needs, there are few types of insurance you should know, and here’s a summary of it:-

Types of insurance

Pros

Cons

Monthly premium

Term Insurance

(Assuming 100k life)

1. Low premium,


2. High coverage


3. Riders available are death benefit, critical illness benefit, accidental benefit and medical card


4. Select coverage term; pay as you need

1. Medical card is capped at 200k per year


2. max coverage of 70 yo


3. no cash value


4. subject to premium increment every 3-5yrs


5. Cannot add-on payor


6. Grace period of 45 days for premium due

RM50

Investment link Insurance also known as ILP (Assuming 100k life)

1. Higher premium because theres cash value


2. coverage up to 100yrs


3. Offers the highest medical coverage of RM3,000,000


4. has cash value


5. Flexibility in coverage term


6. More choices of rider selection


7. Can add-on payor


8. Can select funds


9. Able to add on investment portion


10. Can withdraw cash value


11. When there’s sufficient cash value; policy can sustain for a couple of months/ years without premium

1. Subject to medical repricing


2. the premium is higher


3. Long term premium payment


4. Withdrawal of cash value may affect your coverage term


5. Takes time to build cash value if you don’t have the investment portion


6. As a person gets older, the cost of insurance will rise and may eat into or deduct from the cash value


RM100

Endowment/ savings plan (Assuming 100k life)

1. Short term premium (min. 5 yrs)


2. Option to withdraw guaranteed yearly payout + you get lump sum maturity at the end of the term;


3. Option to pay lump sum and get discount; 


4. Suitable for retirement planning legacy planning and kids edu because there’s a cash value projection for the guaranteed and non guaranteed amount for you to gauge.


5. Can add-on payor

1. May lose your capital if surrender earlier; 


2. Premium is more expensive if you wish to buy life insurance


3. The maturity benefit is not guaranteed


4. Very basic coverage

5. Min. Term is 15yrs - 40yrs


6. Cannot select funds

RM500

Single Premium (Assuming 100k life)

1. One single premium payment


2. Option of having guaranteed yearly payout (125%) and maturity payout


3. Perfect for retirement planning or legacy planning

1. May lose your capital if you surrender earlier.


2. Maturity benefit is non guaranteed


3. Cannot add on payor


4. Not able to select funds

RM75,000


#4 AS AN AGENT, DO I PURCHASE THE POLICY(IES)?

As a working mom of 2 young children, and having been in this industry for the last 8yrs, believe it or not, I have all the above insurance for my needs. I purchase my life insurance using term insurance as it's the lowest cost, and I’m not looking at the cash value as I wanted a large sum assured. And I park this policy under a trust for my family.


Separately I buy life, CI & PA & Medical card under the investment link (ILP) as the medical portion is large, I also put in extra monthly savings in the ILP as I can select the fund.


I bought 6 savings plans for my kids edu and 2 other for my personal retirement strategy. I like to use endowment plans because I can see the projection and it helps me to get a better, clearer projection of the future returns.Though I know the projection is not much compared to other types of investment that may to give me higher yield. Higher yield comes with higher risk. And lotsa research and study is required before putting in the gold nuggets :) But, I do try my fair share on the other investments such as P2P lending, Gold, ASB, FD and Cryptocurrency but I've not dabbled into shares as it’s volatile, I’m not a risk taker, I prefer something that is predictable. It takes time to study the market trends and what nots.


And lastly I’ve also got a single premium policy to also help with my retirement planning and I’ve come up with my very own retirement strategy blueprint as a guide on how to achieve a yearly passive income of RM50,000 to RM100,000 during my retirement :)


#5 HOW MUCH IS THE AGENT’S COMMISSION?

I know some of you are dying to know this 😂 or probably are curious 😎…. so here it is:-


PRODUCT

RATE

FLUCTUATES

TERM

REMARKS

TERM

35% - 40%

Commission rates fluctuates throughout the 6 yrs on a downward trend

6 yrs

As long as the premium is paid by policyholder

ILP

20% 

Commission rates fluctuates throughout the 6 yrs on a downward trend

6 yrs

As long as the premium is paid by policyholder

ILP INVESTMENT PORTION

3%

Commission is capped at 3%

throughout policy holder term

As long as the premium is paid by policyholde

ENDOWMENT

10% - 25% (depending on premium term)

Commission rates fluctuates throughout the 6 yrs on a downward trend

5-6yrs

As long as the premium is paid by policyholder

SINGLE PREMIUM

3%

Commission rates fluctuates throughout the 6 yrs on a downward trend

One time

Not applicable

So these are the TOP 5 I could think of, if you want me to include other questions, feel free to dm me :) stay safe!


Do check out my other websites :)

www.victoria-lim.com

Https://victoria-lim.planyourfuture.today

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Location: Kuala Lumpur, Federal Territory of Kuala Lumpur, Malaysia

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