Takaful – What’s In It For Me?

Takaful – What’s In It For Me?


According to the Life Insurance Association of Malaysia (LIAM), insurance coverage among Malaysians in 2018 increased 9.6% to RM1.51 trillion compared with the corresponding figure of RM1.38 trillion in 2017.

LIAM however also states that around 12.5 million or 50% of the population had life insurance coverage but out of that pool, 90% were under-insured, meaning their coverage might only be one or two times their annual income. The rule of thumb is 10 ten times the annual income.

Bank Negara findings additionally revealed that the insurance penetration rate has been stagnant over the last five years and a significant protection gap remains.

This begs the question – is takaful/insurance even a necessity in the first place?

Great Eastern Takaful Berhad Chief Executive Officer Shahrul Azlan Shahriman believes it is and explains why it is important to get on the journey of understanding the merits of sound financial planning early on in life, adding that a protection plan is a must-have for one’s financial well-being into the future.

Is there even a difference between takaful cover and conventional insurance?

Firstly, the concept of takaful/insurance is about providing a financial safety net that helps you take care of yourself and those you love when you need it the most.

Takaful is a protection plan based on shariah principles where participants mutually guarantee each other through contributions into a fund managed by the Takaful Operator. This differs from conventional insurance where a policyholder buys insurance by paying a premium to the Insurance Company that guarantees the policyholder.

Why do we need takaful coverage?

The same reasons why you need a conventional insurance policy – one is shariah compliant the other is not.

After settling down, a breadwinner’s responsibility usually goes beyond providing for the family’s day-to-day needs – it is about planning ahead in case the unexpected happens such as a serious illness that severely affects one’s ability to work. This could mean that the chances of getting hired again is close to none.

A family takaful protection plan can cover the breadwinner as compensation, and with that, the participant can continue to fulfil his or her debt commitments such as loans and credit cards.

How does that work?

Consider this scenario. The breadwinner of Family A suffers from kidney failure while the breadwinner of Family B has a heart attack while the partner is diagnosed with breast cancer.

Now, let’s put the cost of these diseases and treatments in perspective:

IllnessEstimated treatment cost
Treatment for kidney failure
RM250 – RM300 per session
Heart attack
(Coronary angioplasty)
RM17,554 – RM41,797
Breast cancerRM18,000 - RM395,000

The worst part about these diseases is that it usually triggers a domino effect leading to job loss or even death. Then there are also the unfortunate and tragic accidents that can cause loss of life. The humbling reality is that it can happen to anyone, anytime.

With a protection plan, you can ensure your loved ones are able to maintain their existing lifestyle and pay the bills should something happen to you. As a safety net, a takaful cover gives you and your dependents more than just financial aid, it helps to protect their hopes and realise their dreams in your absence.

It is also important to get a protection plan early on in your career and you are still far off from your peak earning potential. Why? Because the financial pressures will only add on when you start a family. Embarking on a protection plan early on will give you a head start to build your savings. Besides that, the contribution is usually cheaper when you are young.

If that’s the case, why are there people still uninsured?

Several reasons. People are over-focussed on ensuring that their income covers all their bills and financings on a day-to-day basis. They live in the present and because finances are tight, they don’t even want to think of what could happen. But that is precisely what they should do. Imagine if tragedy strikes, how do we go on? Who or what can we fall back on? We need to prepare for tomorrow and the day after. Start somewhere, even if it is a basic plan that suits your current affordability levels, then slowly build your portfolio as your income increases. Other reasons include the lack of awareness on how takaful coverage is a safe and viable option for those looking to diversify their wealth/ equity portfolio.

In this regard, I am happy to note that the Government’s push to increase takaful and life insurance penetration to 4% of GDP or 75% of the population by 2020 is within sight, according to a recent Fitch Rating report.

At Great Eastern Takaful, we have our ears close to the ground to find out what people are looking for in a protection plan and meeting their specific and differentiated needs through our value-added and innovative product offerings. Consistent and up-to-date training sessions for our agency workforce also mean our takaful advisors are able to offer you holistic solutions that take into account your affordability, the needs of your family and your own lifestyle goals.

So if you have not signed up for a takaful plan, don’t wait. Visit us here for some sound financial planning advice.

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