One thing that Malaysians should be thankful for is our healthcare system. It has never been in doubt that Malaysia has one of the best public healthcare systems in the WORLD. The Malaysian Government has even allocated a whopping RM32.4 billion budget in 2022 to run our healthcare system.
Be that as it may, due to heavily subsidised healthcare by the Malaysian Government, overcrowding and long queues (especially for non-critical patients) have been a common sight in public hospitals.
Waiting is TORTURE for some people especially when they are in pain. Some illnesses can be very painful even if it is not critical (my own experience with Influenza B).
Do we have any alternatives other than public hospitals? Yes, we do! Malaysia has a two-tier health system which means that we also have access to private hospitals (as of 2020, there are 219 private hospitals in Malaysia).
Public hospitals are definitely the cheaper option but when you are down with a certain illness, private hospitals can provide you with fast quality treatment and the highest form of comfort as compared to public hospitals.
More often than not, you have to be insured (via insurance / takaful) to gain easy access to private hospitals (unless you have a large financial safety net).
Insurance / takaful is a form of financial protection and is generally affordable to a lot of Malaysians.
Is there a difference between insurance and takaful? Takaful is shariah compliant. Insurance is not. However, non-Muslims can still apply for takaful and Muslims also can apply for conventional insurance. There are no restrictions in law in regards to this (ask your conscience first before you choose!).
From here onwards, I will use “financial protection” to refer to both as both serve the same purpose.
Financial protection, in general, protects you from suffering from financial disaster in the event of death, total permanent disability, critical illnesses (e.g. stroke, cancer, heart attack, kidney failure, etc.) hospitalisation, and accidental death.
1. How do I get financial protection?
There are many companies which provide financial protection (e.g., Prudential / PruBSN Takaful, AIA / AIA Takaful, Great Eastern / Great Eastern Takaful, and many more). Whatever your choice is, always choose to go with an established company with a proven track record.
This is for your own peace of mind. You do not want to pay the premium / contribution for a long time and suddenly see the company that assures your financial protection go bankrupt.
You have to find agents / consultants that represent these companies to help you apply to get financial protection. These agents may be your acquaintances, family members or strangers. You can even find them on social media. They are always happy to help!
2. What do you mean I have to apply for financial protection? Does it mean my application can be rejected?
Short answer: Yes. Long answer: It depends on your health history and/or other technical factors. It is COMPULSORY for you to declare your health history to the company that you decide to go with when you apply to them to give you financial protection.
The reason for this is because the underwriters from these companies must first assess your health risks before agreeing to give you financial protection. The higher your health risks, the higher the chance your application may get rejected.
However, sometimes miracles do happen, and your application may be accepted without any hassle! Underwriters are human too. Pray as hard as you can that they will be lenient with your application.
You miss 100% of the shots you don’t take so it is better to get financial protection early if you are yet to be protected!
3. What kind of financial protection do I need?
Financial protection comes in a lot of forms.
First, a basic plan would usually give you coverage for Death / Total Permanent Disability (TPD).
What it means is that upon your death or upon you suffering from Total Permanent Disability, you or your next of kin will receive a sum of money that was agreed upon when you first applied for financial protection.
For example, you have a takaful certificate with Company P where it was agreed that you or your next of kin will receive a RM350,000 lump sum upon your death. You pass away after 5 years. Company P will then pay to your next of kin RM350,000 in CASH.
Second, another coverage which is often overlooked is the coverage for Critical Illness. This is where you will receive a sum of money upon diagnosis of a critical illness.
For example, you have an insurance policy with Company B, wherein besides coverage for Death / TPD, it was agreed that you will receive RM200,000 upon diagnosis of a critical illness. After 10 years time, you are diagnosed with cancer. Company B will then pay you RM200,000 in CASH.
Oftentimes, you would need 5-7 years to recover from a critical illness. You are not able to work 110% like how you are working now if you are suffering from a critical illness.
The amount insured for critical illness will serve as your financial / income protection as you can still survive the next 5-7 years without working.
There are times when the amount insured can help you get palliative care to better improve your quality of life while you recover. Hence, you can focus on your recovery ASAP without the worry of financial stress.
Third, hospitalisation coverage is actually the “ticket” for you to receive fast and quality treatment in private hospitals. A more commonly used term for this coverage is medical card. There are a lot of variations across financial protection providers when it comes to the coverage provided by the medical card.
Usually, it’s important for you to look at the Annual Limit, Lifetime Limit, the exclusions, the waiting period, the room & board amount you’re entitled to, and co-insurance (if any).
The reason why hospitalisation coverage is essential is due to the inflation of medical costs. The cost for surgery in 1992 is not the same as the cost for surgery in 2022. Even minor surgeries nowadays can cost up to RM5,000 and above.
Rising medical cost is no joke and can cause you to face financial disaster if you do not prepare early. As the Malay saying goes, “sediakan payung sebelum hujan”.
Imagine you’ve worked so hard for 10 years and you’ve finally saved up to RM200,000 to own your dream house. God forbid, you get admitted to the hospital for a heart disease. What would happen to your savings of RM200,000? It would be a waste if your savings are used to treat your heart disease — coronary angioplasty can cost you around RM30,000 and a heart bypass surgery can cost you up to RM70,000.
Lastly, coverage for accidents wherein you will receive a sum of money due to loss of body parts due to accidents. If your job poses a high risk to your health and life, it is good to think about having this coverage as you will not be able to work as you normally do if you lose any of your body parts due to an accident.
Might as well receive some benefits to “compensate” for the future income that you could have received had you not lost your body parts!
4. This seems like a lot of information to digest. But what kind of coverage do I really need though?
Usually, it depends on your life’s needs. A professional agent / financial planner will advise you to assess your cash flow, commitments, and expenses; among others, before advising you on what kind of protection you really need.
This is important because you have to fully understand why you are paying for financial protection and that is to have peace of mind.
If you do not do any basic financial assessment based on your needs, there is a chance that you will either be underinsured or overinsured when your insurance policy / takaful certificate is in force.
Some common factors that my clients have considered in assessing their actual needs include their current work and income, spouse, children, parents, siblings, tangible assets (vehicles, buildings, housing, and investments), car loan, education loan, personal loan, and credit card loan.
This will allow you to accurately choose the amount of coverage and the type of coverage you need to insure yourself and the people around you should anything happen to you.
Always keep in mind that while having comprehensive coverage (coverage for life / TPD, coverage for critical illness, hospitalisation, and accident) is good, it does not necessarily mean that you are adequately protected (cashflow-wise).
Being overinsured at times may not be a good idea as well because you can always utilise your extra money to invest elsewhere and make more money.
5. Alright, I am interested. Now let’s talk about the cost. Is it expensive to get financial protection?
The number one factor to determine the cost of financial protection for yourself is actually your age. Usually, it is cheaper when you are younger. Next, is the nature of your work / business. There are high risk jobs which may affect the cost of financial protection. The risk factor for a construction worker is definitely different from one who works in an office in a comfy chair.
Your health history may also affect the cost of your financial protection. There are incidences where even BMI is taken into account and if you have pre-existing illnesses, you may have to pay a little bit more than usual to get your financial protection. Ultimately, it depends on the assessment of the underwriter who will go through your application for financial protection.
6. Alright. I think I will get all the coverage available to get the ultimate peace of mind. Money is no issue to me. Now I can go on and do anything I want without any worry right?
Not necessarily. In your financial protection policy / certificate, there is a section that lists down all the exclusions i.e situations / incidents not insured by your financial protection. There is also a waiting period to use the medical card for specified illnesses (you have to wait 120 days i.e example below)
Always get your professional agent / financial planner to go through with you the exclusions and conditions stated in your financial protection. Any professional agent / financial planner would go through with you about the exclusions transparently.
In short, do not do anything that is against the law and do not be involved in activities which may lead to higher risks of you getting treated in the hospital!
If you are a generally healthy person and you are able to work and get a decent income to support yourself, your family, and to achieve your dreams, you actually have a moral obligation to get financial protection for yourself as there are always solutions that fit your budget. Those who are actually poor or in poverty need Government-subsidised healthcare more than some of us who are able-bodied and able to find an income for ourselves.
Think about it like paying for electricity bills. You don’t actually “see” the actual electricity that you are paying for, but why are you paying for it monthly? Because your quality of life will suffer without the benefits of electricity. Similar to financial protection. You may not “taste” the benefits early but when life decides otherwise for you, you need the financial protection benefits more than ever.
If you ask, “Why should I worry about all this? I am perfectly healthy and I have never had any bad health history in my whole life.“, I just have to let you know that over 100+ people I have met in 2021, around 50-60% of them have either underlying health conditions, are on medications for illnesses, or have had surgeries in the past.
Guess their age range? They are around 22-26 years of age. This is actually worrying especially taking into account how there are so many unhealthy food and drinks (too salty or too sweet) being marketed around unknowingly in social media as a “lifestyle” and as a “getaway” for our stressful lives. It is definitely more stressful if you cannot live your life 100% due to an illness that you are suffering from when you are young.
Written by: Aizat Syamil, Wealth Planning Strategist
*This article was first published on LinkedIn