Insurance 101: Insurance Basics For Malaysians

Are you thinking about getting insurance coverage but don’t know where to start? We break down everything you need to know about getting an insurance policy for the first time.

What Is Insurance?

At its most basic level, an insurance policy is a contract between you and your insurance provider. When you purchase insurance, you pay the price of the policy (called the premium) to your provider. In turn, your insurance provider will give you financial compensation if an unwanted event covered under your insurance policy occurs.

The reason why there are so many different types of insurance out there is because each policy provides coverage for different things. Some types of insurance may not be as necessary for you to get just yet, whereas some are crucial or even compulsory by law – so educate yourself on the different types of insurance and see which you will need the most.

Types of Insurance

General Insurance: Motor, Travel, And Property Insurance

These types of insurance are tied to a specific object of coverage and are quite straightforward.

  • If you own a vehicle, you’ll need to purchase motor insurance (third-party motor insurance is mandatory by law in Malaysia).
  • If you’re going on a trip, a one-off payment from as low as RM10-20 can insure you against emergencies and inconveniences for up to hundreds of thousands of Ringgit.
  • Most home insurance policies aren’t compulsory in Malaysia, but you can choose to insure your home and belongings against a variety of events.

Like with all kinds of insurance policies, you’ll have to carefully study what occurrences are included in your coverage and what is excluded from protection.

Health Insurance: Medical And Critical Illness Insurance

Medical insurance is the most basic type of health insurance and should be the first insurance policy you get. Also known as hospitalisation and surgical coverage (but more commonly referred to as medical card insurance), it reimburses the cost of your in-patient hospital treatment and medical expenses. With a medical card, you don’t need to go through the claims process to make an insurance claim – just present your medical card at a recognised panel hospital and the bills will go straight to your insurer for evaluation.

Once you’ve gotten yourself medical insurance coverage, you shouldn’t assume that you’re fully protected from a health insurance perspective. Having a medical card may be good enough in the case of one-off medical emergencies, but what if you’re diagnosed with a critical illness? A medical card would only cover your hospital expenses, whereas you’ll need more financial protection than that if you’re diagnosed with cancer. Critical illness insurance provides a lump sum payment to your or your beneficiaries upon diagnosis, which can help with your long-term recovery and cover any loss of income.

Life Insurance And Personal Accident Insurance

Life insurance provides you or your beneficiaries with a payout (called a benefit) if you happen to die or suffer from total and permanent disability ( TPD) during the policy period. The phrase "during the policy period" is key because there are two types of life insurance policies: term life insurance and whole life insurance.

Term life insurance only covers you for a set timeframe – usually 10, 20, or 30 years. If you die or suffer from TPD during this period, your loved ones will receive the benefit, but if you do not, you and your beneficiaries will not receive anything. On the other hand, whole life insurance covers you for the rest of your life, but the premium is significantly higher compared to a term life policy with the same sum of coverage. You can watch our informative videos to find out more about the differences between term life and whole life insurance to find out which is better for you.

Meanwhile, personal accident insurance provides you protection for death, disability, and medical expenses arising from an accident. Personal accident insurance is a bit more limited compared to life insurance as you won’t get the benefit if your death or TPD is caused by natural causes.

Savings and Investment-Related Insurance

Did you know that insurance plans have elements of savings and investment too? With a savings and investment-linked policy, you or your beneficiaries will receive the death or TPD benefit as with life insurance policies. The savings and investment elements kick in when the policy offers additional features such as guaranteed cash payments, non-guaranteed dividend payouts, and a maturity benefit (a sum of money you get back when your policy ends).

How To Choose Your First Insurance Plan

As you can see, there are many types of insurance coverage out there. Of course, you aren’t expected to purchase all these different policies at one go – especially if you’re just starting out on your own financially. It goes without saying that better coverage and higher premiums come hand-in-hand, so think carefully about the level of protection you need and how much you can afford to pay. A good strategy is to start off with some basic policies first, and then add on riders (additional coverage that sits on an existing insurance policy) or different plans along the way.

If you would like to find out more about each type of insurance on a deeper level, you can read up on some of our insurance-related articles here. And if you’re ready to look at what insurance policies there are in the market right now, you can find, compare, and apply for insurance products all in one place at RinggitPlus.  

0 comments

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  • Yuzhen

    Hi I am going to be 55 in another one month. Think of increasing my insurance coverage. Which is more cost effective? To get a Term Insurance or a Life Insurance ? I am still working and do not have any pre-existing condition.

    Reply
    • RinggitPlus

      Hi, Yuzhen

      Increasing your insurance and being cost-effective depends on the length of your intended coverage. If you looking have a designated period like 10 years, 20 years and so on, then it would be better to get a Term Life Insurance. However, if you want to be insured for life, then it is advisable for you to get Whole Life Insurance.

      Thanks for the question and we hope this helps.

      Reply
    • Nerina

      Can you suggest the type of insurance that i should get for myself? I'm a girl, 22 years old. Thank you in advance :)

      Reply
      • RinggitPlus

        Hi Nerina

        You can start out with getting a term life insurance or medical insurance to help you deal with medical bills.

        Thanks for the question and we hope this helps.

        Reply
      • Ida

        Hi, I have a problem whether to choose term life insurance or medical insurance. My company has covered up to rm25k medical insurance card. However, I am planning to take even more secure insurance (considering I maybe not working there my whole life). What should I do bcause I am quite confuse with all these insurance thing.

        Reply
        • RinggitPlus

          Hi, Ida

          Firstly, we are glad that you have taken the right approach by thinking about getting more coverage. The next thing you need to do is to determine your commitment and your intention. If you want to supplement your company's medical card, then you can opt to get another medical insurance. If your intention is to gather more coverage beyond just medical expense, then you can opt for a whole life insurance. You can head to our webpage on insurance for more information: https://ringgitplus.com/en/whole-life-insurance/.

          Thanks for the question and we hope this helps.

          Reply