7 Types of Life Insurance to Consider in Malaysia

No one can deny that a disaster can occur at any time. Therefore, every individual needs to have life insurance coverage. Each person requires different types of life insurance depending on their individual and family needs.

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Important Things to Know About Each Type of Life Insurance in Malaysia

Essentially, life insurance provides benefits when the policyholder passes away. The benefits received can be used to cover living expenses, children’s education, and more. In the case of an accident resulting in disability, the compensation will be given to the policyholder. This compensation can be used to cover ongoing medical costs, transportation, and other expenses incurred due to loss of income.

In Malaysia, there are two types of life insurance: term life insurance and permanent life insurance. Each type offers specific advantages to protect you and your family at different stages of life.

Term Life Insurance

This type of life insurance is the most popular choice among individuals in Malaysia. This is likely due to its lower premium cost compared to other life insurance types. This plan allows policyholders to choose the policy term – the usual policy terms offered are five, 10, 15, 25, and 30 years.

If you take a 20-year policy and pass away within the policy term, your beneficiaries will receive the benefits. However, if you pass away after the policy term has ended, your beneficiaries will not receive any compensation. It is highly recommended to keep track of your policy term or expiration date so you can renew your policy for continuous coverage.

This type of life insurance includes Term Life Insurance, Mortgage Reducing Term Takaful, Endowment Insurance, and Investment-Linked Insurance.

Types of Life Insurance	Explanations
Term Life Insurance	The protection period is limited to a specific duration; Life insurance premiums are cheaper compared to other life insurance plans; Policyholders are covered for a fixed period ranging from five to 30 years depending on their needs; In the event of death or permanent disability during the policy term, you or your beneficiaries will receive the insured amount. Alternatively, you may receive a return of premiums based on the policy terms. Benefits are typically paid as a lump sum, depending on the payment structure of the insurance company; This plan is most suitable for income replacement in case of permanent disability.
Mortgage Reducing Term Takaful (MRTT)	This plan helps contributors settle their remaining home loan balance if they pass away, suffer from critical illness, or become permanently disabled; It’s suitable for asset transfer and estate planning.
Endowment	Offers combined insurance protection and savings; Money will be paid to the beneficiary if the policyholder passes away during the policy term; Savings will be returned to the policyholder after the policy term.
Investment-Linked Insurance	Combines term life insurance with unit trust investment. Money will be invested in chosen funds with ratios determined by you; Allows policyholders to withdraw part of the current account value during the protection period; Suitable for savings, wealth transfer, and wealth accumulation with deferred taxes.

Permanent Life Insurance

Unlike term life insurance, this plan is designed to protect individuals for their entire lifetime. Therefore, the premium for this plan is more expensive compared to term insurance policies. Permanent life insurance includes Whole Life Insurance, Life Annuities, and Additional Rider Protection.

Types of Life Insurance	Explanations
Whole Life Insurance	Long-term protection that pays a sum if the policyholder dies or experiences permanent disability; Insurance premiums do not increase with age; Usually more expensive due to having a cash value; Offered in two forms – participating and non-participating plans; Suitable for wealth transfer and tax-deferred wealth accumulation.
Life Annuity	The insurance company agrees to pay annuities continuously throughout life; Premium contributions are paid in a lump sum or periodically, fixed or variable depending on investment growth; Ideal for retirement planning and tax-deferred wealth accumulation.
Additional Protection Riders	Additional protection that comes with basic plans such as endowment or whole life; Rider protections include critical illness, medical or health, death or disability due to accident.

Get Your Life Insurance Now, Protect Yourself and Your Loved Ones

Consult with your insurance agent to explore the advantages offered by each type of life insurance. Choose the type that best fits your needs and current circumstances. It is important to note that your life insurance policy should be reviewed every few years to ensure it remains relevant and provides the best coverage.

Life insurance cannot replace you as the breadwinner in the family. However, it serves as financial protection. Life insurance offers financial benefits that can help your dependents until the family’s finances stabilize. For more information about the best life insurance in Malaysia, including the types and benefits of coverage offered, visit the Qoala website.