Insurance Protects Your Family from the Unexpected

It is not easy to accept, but even the young and seemingly healthy are susceptible to life-altering accidents and illnesses. While healthy lifestyle habits can help to reduce the risk of such illnesses occurring, one cannot completely guarantee that nothing untoward will happen to them. To ensure that your family is adequately protected from financial hardship that stem from unforeseen circumstances, the first thing you need to do is evaluate your family’s insurance policies.

Review your insurance policies and determine your protection gap

There is a general misconception that having one or more insurance policies means you are fully protected against all unforeseen circumstances. The question to ask yourself is whether you have sufficient insurance coverage should an accident or serious health issue occur. One way to determine this is to calculate your protection gap

Determining your protection-gap is simpler than you think:

Step 1: Figure out the resource needed
The Life Insurance Association provides a rough guide on how to determine what resources you should have in the event of death or critical illness. To ensure your family is well cushioned in the event of your unexpected death, you should have resources of at least nine times your annual income available. In the event of a critical illness, it is recommended to have resources of at least five times your annual income. This is to ensure that your family has sufficient financial buffer to keep things running while they figure out how to adapt to these big changes in their lives.

Step 2: Tally your current available resources
Knowing what you need, it is time to take stock of all the resources you currently have. This could include cash savings, easily liquidated asset (shares, unit trust) and protection coverage from insurance policies (ie. how much your insurer would pay out in the event of death, total and permanent disability or critical illness). Adding these up, you’ll have the total sum of what funds your family will have to work with.

Step 3: Calculate your insurance gap
Once you have the two figures from Steps 1 and 2, just do a simple deduction, as per the formula to find your protection gap amount.

If the number you are left with is negative, you have got a gap in your family’s protection. This means they would not have sufficient funds to tide them through after your death, or even as you recover from a serious illness.

Basic Family Insurance Need

Here are several types of basic insurance that most families require to protect the family finances from the unforeseen.

1. Health Insurance
Health insurance provides protection against the cost of medical care (ie. hospital bills) in the event you suffer an injury, illness or disability. Current health insurance cover higher annual hospitalisation claim limit of up to $1M or more. Health insurance is not only important for the family breadwinner(s), it’s also critical for all dependents in the household, including children and grandparents, to be adequately protected because anyone may require medical care at any point in time which can strain the family finances.

2. Life Insurance

The primary purpose of life insurance is to give your loved ones financial peace of mind by providing a lump sum pay-out in the event that you suffer from a critical illness, disability (which might render you unable to work) or pass away.

There are two main types of life insurance that you should consider:

• Term Life Insurance provides insurance protection over a fixed period of times or up to a certain age. Once the policy term expires, your coverage will end.
• Whole Life Insurance provides insurance protection until you pass-away or reach 100 years old (depending on the plan).  If you choose to terminate the policy before death, you may receive the surrender value of the policy.

As parents, having life insurance would be most crucial for you because your children (and sometimes, your aged parents) depend on you for financial support. Even if your family is a dual-income household, life insurance remains important because the loss of either of you will make it doubly hard for the other to manage the household expenses and maintain your family’s standard of living.

For families where one parent stays at home to look after the children or elderly grandparents, it may still be worth considering having both parents covered, as it can be costly to find alternatives such as childcare or helpers.

3. Critical Illness and Dread Disease Insurance

Health insurance will cover the cost of hospitalisation, surgical procedures and outpatient treatments that are covered in the policy. However, the pay-out only reimburses you for treatment-related expenses. Critical Illness (CI) insurance is highly recommended for the family breadwinner(s) as it provides a lump sum pay-out that’s not restricted to treatment but upon diagnosis of any one critical illness — meaning the cash can be used to cover your daily living expenses and loan instalment repayment as an income replacement during your recovery period.

This is a huge benefit, as health insurance alone would not provide the financial support necessary to cover your daily expenses, which will prevent you from dipping into your hard-earned savings.

4. Personal Accident Insurance

Personal accident (PA) insurance, is meant to provide a lump sum pay-out in the event that you suffer a serious injury, disability or death as the result of an accident, which can help offset some of financial impact from loss of income. This policy also provides coverage for medical expenses as well.

PA policies are especially useful for children and the elderly, as they are more prone to falls.

How Much Would Basic Family Insurance Coverage Cost Me?
The amount of insurance coverage you will need for your family is typically dependent on a variety of factors, such as your profession, liabilities, person lifestyle and number of dependents. When selecting insurance policies, it is recommended to spend about 10% to 20% of your monthly budget on insurance.

1. Home Insurance is designed to protect your home contents (e.g. furniture, television, etc.) and cover the cost of renovations in the event that they are damaged by events such as water damage, fire damage, theft and other causes outlined in the policy.

2. Car insurance is mandatory in Malaysia and protects your vehicle against theft or damage from accidents. It also provides liability protection from legal claims in the event’s that you get into an accident that causes accidental injury, death or damage to property. Costs for car insurance vary widely, depending on you and your vehicle.

3. Domestic helper insurance is mandatory in Malaysia and provides important coverage for your helper against health concerns.

4.  Maternity insurance is meant to provide coverage in the event the mother insured suffers complications during pregnancy, up until birth, which can include abruptio placentae, ectopic pregnancy and stillbirth among other conditions. It is also meant to cover your baby in the event he or she suffers from any congenital illness such as Down’s syndrome, or needs additional medical care, due to conditions like severe jaundice.

5. Travel insurance is a must to protect you from travel delays, trip cancellation, missed connections, and late or lost luggage. More importantly, travel insurance provides you with personal accident and medical expense coverage in the events that an accident causes injury, disability or death.

Travel insurance plans are not just for individual travellers — there are also plans available that can provide protection for families. Family plans are especially valuable for couples with children as they cover children up to the age of 21.

If you are a frequent traveller, you can also consider purchasing annual travel insurance plans instead.

Ready to Learn More About How You Can Protect Your Family?
Having the right family insurance plans is important to ensure that you would not need to sacrifice your hard-earned savings or lifestyle to cover any unexpected expenses.