The Importance of Life Insurance and the Various Types of Life Insurance Available in Malaysia
1. Introduction
Today, life insurance actually the one of everybody needs. As we know, it is a type of financial protection to anyone who bought it. Basically, life insurance is an agreement between insurance policy holder and insurer, where the insurer promises to pay an amount of sum assured to beneficiary upon the death of the life insured. In other words, an individual’s pure risk is shifted to insurer in the consideration of premium paid by the policyholders. The premium is either paid regularly or in a lump sum.
The concept behind the life insurance is “repair the house before it rains”. It is common that we prepare an umbrella even it is a sunny day. By the same token, an individual will plan how to meet their financial obligation to their family in the case of premature death. Therefore, it comes out with life insurance which would provide financial security to the loved ones instead of letting them undergo into a financial hardship upon the death of that person.
In Malaysia, life insurance businesses come under the jurisdiction and regulations of the Bank Negara Malaysia (BNM). All matters regarding insurance in Malaysia is governed under Insurance Act 1996 and Insurance (Amendment) Act 2005. While the life insurance agents are not directly supervised by BNM, but registered under the Life Insurance Association of Malaysia (LIAM) which is the national association representing life insurance and reinsurance carriers. It requires the agents to fulfill and follow certain requirements and regulations.
Besides, in regard of tax treatment to life insurance, there are tax advantages given to life insurance policyholders by the virtue of Section 49, Income Tax Act 1967. Under this section, life insurance plus contribution to approved funds (e.g. EPF) is tax deductible up to RM6000 in a basis year for an individual; same up to RM5000 for married couples if the wife opts for separate assessment.
Other than rules and regulations, the life insurance industry is
Today, life insurance actually the one of everybody needs. As we know, it is a type of financial protection to anyone who bought it. Basically, life insurance is an agreement between insurance policy holder and insurer, where the insurer promises to pay an amount of sum assured to beneficiary upon the death of the life insured. In other words, an individual’s pure risk is shifted to insurer in the consideration of premium paid by the policyholders. The premium is either paid regularly or in a lump sum.
The concept behind the life insurance is “repair the house before it rains”. It is common that we prepare an umbrella even it is a sunny day. By the same token, an individual will plan how to meet their financial obligation to their family in the case of premature death. Therefore, it comes out with life insurance which would provide financial security to the loved ones instead of letting them undergo into a financial hardship upon the death of that person.
In Malaysia, life insurance businesses come under the jurisdiction and regulations of the Bank Negara Malaysia (BNM). All matters regarding insurance in Malaysia is governed under Insurance Act 1996 and Insurance (Amendment) Act 2005. While the life insurance agents are not directly supervised by BNM, but registered under the Life Insurance Association of Malaysia (LIAM) which is the national association representing life insurance and reinsurance carriers. It requires the agents to fulfill and follow certain requirements and regulations.
Besides, in regard of tax treatment to life insurance, there are tax advantages given to life insurance policyholders by the virtue of Section 49, Income Tax Act 1967. Under this section, life insurance plus contribution to approved funds (e.g. EPF) is tax deductible up to RM6000 in a basis year for an individual; same up to RM5000 for married couples if the wife opts for separate assessment.
Other than rules and regulations, the life insurance industry is
References: 7. http://www.greateasternlife.com/my/en/insurance/products/products_protection.htm (accessed on 31st may 2012) 8 9. http://www.liam.org.my/index.php?option=com_content&view=article&id=723&Itemid=97 (accessed on 31st may 2012) 10 [ 4 ]. http://www.liam.org.my/index.php?option=com_content&view=article&id=54&Itemid=59 (accessed on 31st may 2012) [ 5 ] [ 6 ]. http://biz.thestar.com.my/news/story.asp?file=/2012/3/19/business/10932958&sec=business (accessed on 31st 2012)