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My take on life insurance, critical illness coverage and medical card

I have recently reviewed my will and that caused me to look into my insurance policies.  I have a conventional policy bought by my parents when I was 18, another life insurance policy with life and critical illness coverage, and a medical card.

I have spent quite some time trying to understand how to make the decision and figured that someone else may be going through the process and this may help.

Photo credit: Pixabay

After multiple discussions with my very experienced insurance agent.  Here are my conclusions.

Before that, some background about myself so that you can put this into context.  I'm a serial entrepreneur, now running my third business, a SalesTech startup, creating an innovative lead management system for lead-to-sale (L2S) industries.  I have recurring income from my first business and also some residential properties that I have invested in.  I'm in my early 40s as at writing and I'm married with a 3-year-old son and I'm the sole income bearer for my family.

Life insurance

As I structured my will and made myself familiar with the process and timeline of how the estate will be distributed to the beneficiaries, I realized that there is a gap.  In Malaysia context, the most immediate monies that the beneficiaries can access to is EPF (KWSP) and insurance payout, assuming it is a clear death (as opposed to cases like those lives lost in MH370).  The beneficiaries will have access to this monies in 2~4 weeks time.

I'm the sole income bearer for the family and I have to make sure my family has enough monies to cover monthly expenses, including rental, utilities, education, grocery, monthly instalment to properties (so that they don't have to go through fire sales or auction), etc.

As it may be hard for my wife to go back to the work force with a young kid, I plan to leave behind estate enough to cover 10-year of expenses for my family.  I took count of net property value (after loan) and fill the gap with life insurance policy.

Now, the challenge is that the insurance premium may shoot through the roof (relative to my income) so I looked for ways to reduce the premium while having the payout enough to cover what I wanted.

As part of the insurance premium goes to investment to sustain the policy, the longer I want the policy to sustain (without top-up and assuming market return is at least as projected), the higher the insurance premium.  Example, even though a policy is guaranteed to renew up to 100-year-old by the insurance company, the premium that the agent proposed may only be able to sustain the policy until the insurer is 70-year-old.

In other words, at around 70-year-old, the insurance cost may have been higher than the premium and the previously invested amount (with accumulated return) is not enough to cover the difference.  This is when the insurance company will ask you to increase the insurance premium.

I figured that as I grow older, my kid grows up, my property value appreciates and mortgage loan get repaid, my responsibility and monthly expenses when I'm around 65 will be different.  My kid should be (fingers crossed) done with education, making his own monies, my rental/utilities usage will be much lower, and my mortgage loan instalments would have been paid off.  Just the unencumbered properties should be sufficient to be left behind when I passes.

I will most likely no longer need the life insurance when I'm around 65 year-old.  By then, I will surrender my life insurance policy at the age of 65-year-old and withdraw whatever cash value left in the policy.

Having a clear "exit" allowed me to increase the payout coverage with same insurance premium, instead of aiming for the insurance to be sustainable until 100-year-old.

Critical illness coverage

I concluded that critical illnesses coverage is mainly to make up for the lost of income if any of the critical illnesses hit.  As my main income are passive income, I opted out from critical illnesses.  If any of the illnesses strikes, I won't be able to get any payout, but my medical card will cover me for all the hospitalization and treatments.  If your income is mainly coming from your salary, I would advise you not to follow my strategy on critical illness.

Medical card

To me, this is the most important coverage for my own self, as life insurance is more for people that I left behind.  Most of the latest medical card nowadays have more than a million ringgit annual limit and unlimited lifetime claim.  Well, to be honest, I don't think anyone could really claim that much as the body may not be able to endure million ringgits worth of medical treatments.  I chose the more entry level coverage with RM200 room, of which I can top up if I want a better room.


As I tried to increase the payout while keeping the premium low, I opted out for the riders/waivers as I believe I can still pay the monthly premium even with the critical illnesses.

I also minimized the investment portion of the policies as I personally invest in my own businesses, other startups and stock market.

There is a new plan introduced by an insurance company this month (July 2019) that offers non-claim bonus (NCB) and also optional deductible.  I noticed that I have not made any claim in the 20+ years that I am insured, NCB and deductible make full sense for me.

I plan to go for the RM5,000 deductible, which means that I will need to fork out RM5,000 per policy year if there is any claim, but this significantly lower the insurance cost and premium by around 30%.  In other words, claims below RM5,000 will no longer make sense and I will personally have to absorb those medical expenses.  This is fine for me as I mainly get the medical card to cover bigger claims and I don't bother to go through the claim process for less than RM5,000.

In conclusion, different person may have different need for the insurance policies, but most people may not realize that the need changes as we go through different phases of life.  Instead of signing up for plans thinking that you need it to sustain until your end of life, it may make more sense to think of when realistically you need the plan to cover until and with that additional variable, you can either get higher/wider coverage or lower premium.

What's your personal insurance strategy?  Do share.

The price you pay for fear

I was talking to my mom about investing in lands and she was telling me all the stories she read in newspapers about how people got their lands transacted without their consents and how the lawyers and land office personnel teamed up to cheat the land owners.  She told me that that was the reason she didn't invest in lands, the fear of being cheated.

The Price You Pay for Fear
Photo credit: Samer Daboul

I was brought up in a family that is very prudent and skeptical about almost everything, especially opportunities.  I have to admit that it has served me well in some situations but most of the time it made me paranoid about every single thing in life.  It is good to be prudent and careful, I was told. After all, the chance of getting cheated is much less.

There are already many people making money from renting out rooms on Airbnb.  At the meantime, there are still many people who are afraid that the items in their unit get stolen and afraid that the guests ruin their place, etc.

There are people that would tell you suppliers from China will always ship to you items that don't match what you ordered.  The same people that would tell you not to buy things online or don't invest in stock.

Fair enough, these people usually don't lose any money because of their prudence and that become their mantra in making future decisions and that will also be how they advise their friends and family members.

However, if you take a closer look, do they really not lose anything?  How about the possibility of ending up owning 10-20 properties from Airbnb income alone?  The possibility of making a million dollar business out of the importing the products from China?  And the loss of the value of your saving due to inflation?

Fear is built into us and it is one of the key mechanisms to keep us safe. However, it is important to understand that the fear is normal and here are some of the options you have on hand:

1) If the possible loss is 'affordable' and the opportunity makes sense, take the worst case scenario that you will lose what you put in (time, money and other resources) and treat it as the 'tuition fee' that you need to pay to acquire that knowledge.

2) If the possible loss is big (relatively to your income and saving), research and talk to people who have done it. Go through your fear with them, they may already have a way to mitigate the risk.

3) Now that you know what you have to lose, the available mitigation methods, the risk that you have to take and the possible reward, make a decision.  When you reach this stage and decide not to proceed, it is no longer fear that holds you back, but it is a decision made.  Situation and decision may change when the risk is no longer there, or there is a mitigation method that you come across or the reward become greater.

If you have been having the same fear for the same opportunity, it is time to take the above actions, instead of keep reading and soliciting for the same stories that strengthen the fear.

Some people think that getting cheated are something to be shameful about and they boast about how they have not made any mistake or lose any money.  They don't get to see what they possibly have gained for taking the risk.

If you do make a wrong investment or choice, learn from it, try to identify which part of the journey you could have identified the mistake, laugh about it and add it to your experience and knowledge and it will sharpen your common sense over time.  However, be careful when you try to draw a conclusion that "I will never... again" because this will shut down all the future possibilities.

This doesn't just apply to investment opportunity.  There are equally as many people who are afraid to visit a country because of possible ISIS attack, afraid of meeting someone online because of the horrible stories they have heard, refuse to help someone in need because of the possibility of being cheated, afraid to fall in love again because he/she was used once.

Again, they may have not lost anything from making the above decisions.  Or, they may have lost everything ever possible.

This reminds me of a quote, “A ship in harbor is safe — but that is not what ships are built for.” — John A. Shedd.

5 myths about entrepreneurship (part 3 of 3)

Slide 12: What Is In For Me?
Now that I bursted all the myths and bubbles, why am I still running a business?  Other than I like to torture myself, here are some of the reasons.

What is in for me in entrepreneurship

Lots of Learning:
If you love to learn, this is where all the learning is.  As OffGamers grew, I noticed that none of the partners have any knowledge in financials and I decided to attend the CFA course.  Even though I didn't pass the exam, I learnt enough about financials.  I also learnt more about law and trademark after we received the first lawyer letter.

Entrepreneurship expose you to all areas of business, not just a very narrow scope as an employee in MNC.

Lots of Challenges:
Economy outlook, GST, currency, haze, etc, are all challenges.  If you don't like challenge, please stay away from entrepreneurship.

Self Discovery:
I figured that everything that didn't work in the company or business can be reflected back to me.  For example, when we can't hit sales target in Gapture, it reflects back to me not liking to sell, which goes deeper into I am afraid of wasting others' time, which then leads to my lack of acknowledgement of myself.

Roller Coster - Up's & Down's:
Entrepreneurship is the biggest roller coster ever, if you like roller coster.

Meeting People:
I get to meet people from all walks of life.

Building Culture:
I did some soul searching when running Gapture and I found out that what I wanted to do is actually to build a company that embodies all the values that I want in the country.  Core values in Gapture are Simplicity, Measurability, Integrity, Thirst of Learning and Excellence.

At Gapture, we don't care what race, religion and sexual orientation is our employee.  I requested our HR to drop the religion and race columns (which are very common in all forms in Malaysia) from our interview form.  We only ask that you perform as per job description and achieve your KPI.  We ask for excellence!

I wanted to build an excellent company that Malaysians are proud of, a role model for other companies, one that can inspire others to follow suit and bring excellence to the country.

I don't like the corruption culture in the country and I decided that Gapture is going to walk away from any business if there is a need for corruption.  This is not an easy choice as there is many businesses and companies out there operate in that manner.

Now, when you finally get to start your company, what values do you want to instil in it?  Out of all things that you have been complaining about the country, are you going to make a difference in your company?

Slide 13:
This is my favourite video about entrepreneurship.

5 myths about entrepreneurship (part 1 of 3)
5 myths about entrepreneurship (part 2 of 3)

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