Is This A Good Time To Review Your Insurance Coverage?
Reading this from home?
You’re not alone. Thanks to the coronavirus outbreak, many of us are now working at home and forgoing outside activities. It can be a stressful time. Not only are we stuck indoors, we have to navigate the health and economic uncertainties caused by the pandemic.
But there’s a silver lining: you can use this time at home to work on things that you’ve always wanted to do, or reflect on things that matter, such as your finances.
And during a health crisis such as this, it’s never been more important to review your insurance coverage. Here’s why.
1. To afford medical costs
Being in the middle of a pandemic can be scary. But if you’re insured, there’s peace of mind in knowing that there will be a financial safety net. All insurers under the Life Insurance Association of Malaysia (LIAM) and Malaysian Takaful Association (MTA) have confirmed that they will provide hospitalisation and treatment coverage for COVID-19.
But COVID-19 isn’t the only health condition you should prepare for. The top causes of mortality in Malaysia include ischaemic heart diseases, pneumonia and cerebrovascular diseases. Treating these diseases can cost you – for example, a coronary bypass surgery could cost around RM60,000 at a private hospital (including inpatient charges like hospital charges, room charges and consultant fees).
And these costs are rising. This year, Malaysia’s estimated medical trend rate (i.e. increase in healthcare costs) stands at 14%.
Luckily, your medical insurance policy can cover them if they arise. This is more important than ever now, as we might be entering a recession. When a recession happens, your income may be affected, and your savings may be tied up in illiquid investments or investments that have suffered capital loss. If a medical emergency comes up, an economic recession can make it hard to rely on income and savings alone. But with adequate medical insurance coverage, you’ll be able to afford these costs without putting more stress onto your cashflow or dipping into your savings.
However, your medical insurance benefits will depend on your insurer and type of policy – so when you review your coverage, make sure that it is sufficient to cover current medical costs.
2. To give your family financial security
A coronavirus-sparked recession can be hard to deal with, because it threatens both your health and your income. In times like these, you’ll want to make sure that your family is financially secure, even if your health is compromised. Having that financial safety net during an economic downturn can be comforting.
One of the ways to do so is through life insurance. If something happens to you or your ability to earn an income, an adequate life insurance payout helps ensure that your family will still be able to live comfortably. Your family will be able to use the money to afford day-to-day living costs, or large expenses like a home loan or higher education.
If you’re a sole income earner, or if you partially contribute to your family’s finances, you’ve probably heard it all before: life insurance is crucial. But you should also consider getting life insurance even if you are a stay-at-home parent. Think about everything that you do for your family: transportation, meal preparation, child-minding, cleaning, home repairs and so on. If you were suddenly unable to perform these tasks, your family may need to hire other people to do so.
3. To account for new life circumstances
When was the last time you reviewed your insurance coverage? We’re willing to bet that it’s been years. If you’re a young adult, you may not even have reviewed your insurance plans since the first time you signed up for them – when you were a fresh graduate!
If that’s true for you, then it’s likely that your life circumstances have changed. Here are a few situations where it may be necessary to adjust your coverage:
- You’ve gotten married (or divorced). If you’ve gotten married, you and your spouse may now rely on each other financially, warranting a higher insurance coverage. On the other hand, a divorce may mean removing your spouse as one of the beneficiaries of your insurance policies.
- You have more income. Typically, as your income grows, so does your lifestyle expenses. Consider if your insurance payouts can now meet your lifestyle needs.
- You have more people relying on your income. Whether it’s a child or an aging parent, having someone else rely on you financially may mean that you’ll need a life insurance policy with more protection. For example, you may want a life insurance payout that covers day-to-day expenses for your children, for a certain amount of years until they can financially rely on themselves.
- You have more financial obligations. Are you responsible for paying off a car, a home, a child’s education or a personal loan? Consider if you need increased life insurance coverage to help your family cover these costs if you are unable to.
How do you review your coverage?
It’s helpful to do a review of all your policies. Check your existing policies for the following information:
- Type of insurance. Is it health insurance, life insurance, disability insurance or something else? Knowing what types of insurance you have helps you figure out if there are gaps in your coverage.
- Term length. Some policies have an expiration date. You’ll want to know when a policy expires, so you can decide if you still need coverage after that date.
- Premiums. How much are you paying, and how frequently? This helps you keep track of whether your paid premiums are up-to-date.
- Benefits. What is the sum assured of your policy? Does it have any cash value or additional benefits? Consider if these benefits can cover current medical costs, your growing lifestyle needs and changing life circumstances.
- Beneficiaries. Whom do the benefits apply to? Does it apply to you, your spouse or your children? This helps you tell if there are gaps in coverage, or if you need to update your designated beneficiaries.
You don’t have to go at it alone
Not sure how to get started? Talk to a Prudential Wealth Planner.
A Prudential Wealth Planner can help review your coverage, analyse your needs and help you make informed decisions. The best part is that you don’t even have to leave your home to talk to a Wealth Planner, or even just to learn more about insurance. And in these uncertain times, being on top of your insurance coverage can give you a peace of mind.