Many people think you don’t need critical illness insurance in Malaysia if you already have health insurance or are covered by your employer’s health insurance. Your health insurance might not cover severe illnesses like cancer, a stroke, a heart attack, or kidney failure well enough.
Here’s what you need to know to have a better understanding of both medical insurance and critical illness insurance in Malaysia.
What Is Critical Illness Insurance In Malaysia, And Why Would You Need It?
Critical illness protection gives you a lump sum payment if you get one of the critical illnesses covered by your plan. Unlike a health protection plan, critical illness protection is not designed solely to pay your hospitalisation or medical costs but to provide a sum of money to take care of immediate expenses, which means you are free to use the money however you wish.
For example, if you have one, you could use the benefit to pay for ongoing treatment costs or medical equipment not covered by your medical protection plan. You may also use the money for home nursing care, seek alternative treatments, or pay the mortgage for your family’s survival, whichever can help you focus on your recovery.
Read: Should I Give Up Paying Insurance Premiums In Difficult Times?
How Much Is Enough To Protect Me Against This Unfortunate Event?
The rule of thumb for critical illness insurance in Malaysia is to have three times your annual salary. Why three times? In the event of a critical illness diagnosis, it takes at least three years for you to adjust your lifestyle and recover.
What’s The Difference Between Medical Insurance And Critical Illness Insurance In Malaysia?
| Medical Card | Critical Illness Insurance | |
| What does it do? | pays for the cost of treatment and medication of a hospitalisation | provides a lump sum payout upon diagnosis of one of 36 critical illnesses, total and permanent disability or death |
| What can I do with the payout? | Pay for medical cost of treatment or hospitalisation | The patient can use the lump sum payout for anything they want, not restricted to medical treatment. For example, some use it to help their family’s financial situation. |
| Who does it most benefit? | The policyholder (and his family, if the plan covers family) as it helps pay for their medical treatment | The policyholder and/or their dependents, depending on the payout use. |
| What is the premium payment like? | Premium increases with age | Premium remains the same throughout the lifetime |
| Eligible for income tax? | Eligible | Eligible |
Read: Financial Planning Is Not Only About Having Insurance
When Should You Revisit Your Critical Illness Plans?
1. When your income changes, this will affect your coverage with regard to income protection
2. When your life changes, for example: getting married or having kids, this will also include the consideration of
how your dependants may be affected if you are diagnosed with a critical illness and whether or not you would need a critical illness payout to help with managing your financial obligations
Do I Need Critical Illness Insurance In Malaysia Right Now?
It is common to think, especially in the prime of one’s life, that you have time on your side and that you do not need a critical illness policy. However, critical illnesses do not differentiate between age or gender. Certain behaviours, such as smoking or leading sedentary lifestyles, are high-risk factors for critical illnesses.
One of the diseases spreading the fastest among Malaysians is kidney failure caused by diabetes. Accidents and incidents can cause injuries like major head trauma or third-degree burns, which are hard to predict and require a lot of (and possibly expensive) medical care.
Having a sound financial plan before the unexpected happens is equivalent to having more choices for treatment and recovery. This includes the choice to take time off from work to focus on complete recovery, the ability to choose quality healthcare, or the privilege to spend time with your loved ones instead of thinking about where the payment for the treatment would come from.
Read: Insurance Affordability vs Need, 6 Factors You Should Consider
Case Study Of A Real-Life Example
A client of mine was recently told she had breast cancer and had to have surgery. The total cost of the operation is RM26,000, and it is fully covered by medical insurance. Next, she would have to go through post-treatment, after which she would not be able to return to work for a short time.
Critical illness insurance in Malaysia helps patients cover their living expenses with a lump sum payment. This money can then be used for anything and is not restricted to medical treatment (which the medical insurance already covers).
If you have medical insurance, consider adding a premium waiver rider, which allows you to waive the basic premium if you are diagnosed with a critical illness.
This means that the policy does not need to pay for the stipulated premium, while you would still have medical insurance coverage. If this coverage is within your budget, you should consider taking up this rider.
Read: Should I Nominate My Wife As Sole Beneficiary Of My Life Insurance Policy?
Do You Need Critical Illness Insurance In Malaysia?
Many income protection products are on the market, so spend time understanding which caters to your current financial needs. While you are still well and able to work, you provide food, clothing, and shelter for your family.
But if something were to happen to you, somebody must immediately take over this responsibility for you and your family. This is precisely how income protection works, where insurance will compensate you for the loss of income.
Above all else, protecting and preparing yourself and your family for such uncertainty should be a top priority. That’s why you will need critical illness insurance in Malaysia.
Read: How to Protect Yourself at Different Stages in Life With Insurance
About the Author
Cha Ai Bee is a certified financial planner, AIA Life Planner and certified member of Financial Planning Association Malaysia (FPAM).
