Six Tips to Maximize Insurance Policy Value

Here are six (6) tips to get the best value out of your insurance policy.

1. Go for Early Critical Illness
Typically, a lot of policy comes with Critical Illness (CI) rider which will pay the sum assured if the insured is diagnosed with either of 36 CI. The sum assured is also shared with the policy’s basic sum assured which is the life coverage. With only some minimum premium increase, one can get Early Critical Illness (ECI) coverage which covers 95 CI. The chances of being able to claim under ECI rider is higher since it covers the CI from Low to High Severity. The sum assured is also not shared with the policy’s basic sum assured. To put things into perspective, difference in premium for the two (2) riders for a policy with coverage of Life=100k, CI@ECI=100k, PA=100k, Medical Card and Waiver for a 30 year old is only RM300 per year.

With such minimal extra premium, the chances of claiming is higher in case you are diagnosed with any CI.

2. Avoid hospital income benefit
There is certainly an obsession for agents and policy owner alike to include hospital income benefit as part of their policy benefit. For a simple reason, the insured will get “paid” if they are hospitalized. This rider will pay certain allowance per day if the insured is hospitalized. There will be an agitated feeling by the insured to get warded every time he/she is sick just to claim this allowance. There is also a possibility that this allowance will never be claimed if the insured is never hospitalized.

This rider can be categorized as one that is good to have rather than a need. It’s better to spend the premium paid for this rider on something that is more beneficial such as additional Life or CI coverage or to upgrade your medical card plan.

3. Pay annual premium
There are a few advantages of paying annual premium. One of it is you’ll enjoy lower Monthly Service Charge for you investment linked fund. For a monthly contribution mode, the service charge is RM6.36 per month while for annual contribution mode, the charge is RM5.30 per month. That’s a whooping 20% difference!

A ringgit saved is a ringgit earned indeed.

4. Use contribution waiver wisely
There is also obsession for agents to include contribution waiver indiscriminately in the proposal for clients. Contribution waiver basically will waive the policy premium in case the insured is diagnosed with either of 36 CI or he/she is permanently disabled. As a rule of thumb, I would only recommend contribution waiver in a policy which contains medical card rider. The reason is because a policy which includes medical card rider is likely to have significantly higher premium compared to one without it. If the insured is diagnosed with either 36 CI or permanently disabled, the insured will have a piece of mind of not having to worry about his/her premium payment but still enjoys the policy benefit.

Only pay for a rider which is really beneficial to you.

5. Start early
Any investment advice would place “Start Early” or “Start Young” as its main advice. There is no exception with a protection plan. Start early and you’ll enjoy more benefits or start late and you’ll have to fork out more to enjoy the same benefit. That is also considering that you can stay healthy until you sign up for an insurance plan at a later age. To put things into perspective, for a plan with coverage of Life=100k, ECI=100k, PA=100k, medical card and waiver, premium for a 25 year old will be RM2,900 per year, for a 30 year old will be RM3,300 and for a 35 year old will be RM3,800 per year.

When you are young, time is on your side. So make use of it.

6. Start with investment-linked policy
With AIA, there’s a flexibility of taking up a standalone medical card or as a rider under an investment-linked policy. If you don’t have any financial constraints to start a protection plan with minimum premium of RM1,800 per year, please opt of an investment-linked policy. Opting for medical card as a rider under an investment-linked policy certainly have a cost advantage. A similar medical card plan for a 33 year old female will cost RM1,044 per year as a standalone while as a rider, it will cost only RM558 per year. That’s a whopping 47% difference! You’ll also enjoy slightly more benefits if it is taken as a rider as well.

You’ll get better value from a rider compared to a standalone.

During trying times, it’s good to have these tips to enjoy the most out of your insurance policy.

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