Choosing Between Insurance A and B: Opinion of a friend

The other day my friend and I we talk about Insurance. His idea of guide to life insurance. I am not 100% agree to his idea.   

His simple guide to life insurance.

Life insurance is an insurance. It is used to protect against of the risk of lost of income. For example, let's say A is the bread winner of the family. If something happen to A ( for example die in an accident), you will not longer have income from A. The family still need to survive. Life insurance can provide/replace some portion of the income so that the family still can survive. In some circumstances, A will suffer some form of disability and can no longer work, life insurance provide some compensation to help the family to survive too. Please noted that in Malaysia, the protection against disability is limited to what is specified in the policy. In advanced countries like USA, they have disability insurance that pays as long as you cannot work regardless whatever the cause is. This kind of disability insurance does not exist in Malaysia. In summary, life insurance is used to protect against the loss of income and disability.

So, does life insurance makes sense to you??

1) Do you have dependents?

A) If you are single and have no dependent, it really does not make much sense to buy life insurance.

B) If something happen to me, I would like to leave something for my parents. Is your parent depend on your income for survival?? If answer is no, why buy life insurance?? If you want leave something for your

parent, why not give your parent the money now?? Save the money from insurance premium and give to your parent now every month.

2) If you are home maker and makes no income, why buy life insurance??

3) If you are married and your family depend on you to provide income, in general, you should buy life insurance.

4) However, it may NOT be worthwhile for you to buy life insurance if you have a lot of savings (more than 200K). In general, life insurance in Malaysia get very expensive for payment greater than 200K.

All my comments does not necessary apply to medical insurance. Do your own research to find out what is right for you. If your insurance agent cannot explain to you why you should buy life insurance, why are you buying??

The very complicated and complex thing about insurance in Malaysia is that we do not have pure term life insurance. All insurance product in Malaysia is normally a combination of life insurance, disability protection and medical protection. In most cases, unless your insurance agent is good and you do a lot of research, you really have little or no idea what you are buying. I am not qualify to tell you what you should buy and how much to buy in each circumstances.

The bottom line is you need to know is

1) what are you protect against??

Life, disability, medical

2) What is the likelihood for each risk at your age??

3) What is the cost for each option??

4) What is the maximum pay and deductible in each situation??

Insurance is used to protect against the situation where you do not have enough resources to cover. You need to buy just enough so that when the bad thing happen, you are covered. Buy, you should NOT buy so much that it costs too much to you.