Smart Investor Malaysia


Should I Give Up Paying Insurance Premiums In Difficult Times?


Insurance is an important element of any sound financial plan, and a proper Risk Management plan should cover personal risk (Premature Death, Total Permanent Disability, Dreaded Diseases, Personal Accident and Hospitalisation), property risk (car, house and its contents) as well as liabilities insurance.

Having these insurance policies in place can protect your income, savings, retirement, and peace of mind if uneventful situations were to take place.

Without an insurance policy, the consequences of a tragedy can be much worse, especially with the rising cost of health care that can create a heavy financial burden on your family.

A proper life insurance can be used to pay off mortgages, car loans, and credit card debts, leaving other remaining assets intact for your family in the event of the breadwinner’s premature death.

Life insurance proceeds can also be used to pay for final rite expenses. Better still, life insurance can create an estate for your heirs.

Although insurance is a very important aspect of our lives, yet most people treat it as least important, or even strike it off from their financial budget list.

Spending hard-earned cash on vacations, shopping, movies, expensive data plans and dining is seen as more important than paying for a life insurance premium.

Before signing up for an insurance plan, you should first look at your Net Worth Statement to see how much debts you have incurred. Your insurance must be able to cover the debts so that it will not be passed down to your family in the event of a premature death, disability or critical illness that can result in a loss of income.

Therefore, you should either adjust your cash flow and expenses, or increase your earnings in order to find extra money to maintain the premium payments and excess money for savings.

Even if you have been retrenched, you must not stop paying your insurance premium, or worst surrender the policy. Make sure that your insurance is intact to cover you in this critical moment.

However, should there arise a situation when you are really tight for money, there are a few options that can be taken to make sure the insurance cover stays intact. Let’s have a closer look at them:

Car and Home Insurance


Car insurance premium is mandatory as it is required by the law; so, premium payment is a must.

Same goes for your house fire insurance premium as it is required by bank if your house is still under mortgage.

Life Insurance

You can consider a temporary term, investment-linked, or a whole life non-par insurance policy, which has an affordable premium but comes with big protection to address the problem of huge debts.

If you have an existing traditional whole life policy, you have the option of allowing the policy to exercise auto premium loans (APL) to make sure the protection is not affected due to temporary non-payment of premiums. However, this is only a temporary measure.

You cannot allow APL to exhaust all the accumulated cash values as your policy will then become lapse.

You may wish to convert the policy to an extended term assurance, where there is no further future premiums to be paid, and the sum covered will remain the same until the new revised term of coverage expires. You can even convert the policy to be a paid-up policy with the reduced sum assured.

Health Care Insurance

You’ll never know when you may fall sick or get injured. But you do have options when it happens if you continue to pay your health care insurance premium.

You can lower the premium by considering a standalone health care plan, which has a more affordable premium as compared to packaged plans. But this pretty much depends on your age, gender, health conditions and the coverage amount.

Also, if you are paying a high premium for a bigger coverage, you may want to consider reducing the coverage and get a deductible health care plan with a very low premium.

If you’re planning to do some changes to your existing health care plan, make sure you are aware of the exclusions, waiting period, pre-existing illnesses, as well as other terms and conditions of both the new and the old plan; otherwise you might lose your coverage.

Thus, with the above options, there is no excuse for not paying your insurance premiums.

In any case, before making any of the above decisions, it is best to seek professional advice so that you can make a more informed decision.

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