Insurance Basics

ringgitplus

12th May 2017 - 9 min read

What Is Insurance & Why Do You Need It?

Insurance acts as your financial shield against risks. You can insure anything that you wish to protect, be it your car, house, your health, life, as well as your loved ones, in return for paying insurance premiums.

For instance:

If you fall down a set of stairs and injure your back, you’ll need a personal accident or a medical insurance to help pay for your medical bills.
If you get into a car accident, you will need financial assistance from your insurance provider to pay for the damages done to your and the involved party’s car.

In other words, an insurance policy provides compensation to you or your loved ones should things go wrong, be it a specific loss, illness, damage, disability, or even death.

Here are the most common ways insurance can help you:

Maintain your current style and standard of living if you suddenly face a disability or a critical illness.
Help your family cover the costs of your funeral and provide financial assistance to them in the event of your death.
Drive vehicles with confidence knowing that you’re covered by your insurer should you get injured or can’t afford to pay for the cost of the repairs in the event of a vehicle collision.
Own a property, because mortgage lenders need to know that your home or property is protected against major risks.
Cover your medical costs if you’re diagnosed with critical illnesses such as cancer, heart diseases, or kidney failure.
Go on vacations without having to worry about flight cancellations or if you fall ill during your travels.

How Does Insurance Work?

After you’ve chosen the type of insurance you need and what you want to be insured against, the insurer will analyse the risks that may apply based on a range of different factors and from there, determine the insurance premium you need to pay.

Once both parties have agreed to a policy contract, you are protected against the predetermined risks in the form that the insurer will compensate or cover your loss.

Here are the three important things you need to know about insurance:

Make sure you understand your policy and coverage before you buy. You can find all the information about your coverage in your policy document. It also includes a complete list of what you’re protected against and what is excluded.

For instance, your car insurance may cover the damages done to your car in the case of a car accident, but not your personal belongings that may have been damaged during said accident – such as your smartphone or laptop.

Remember to pay your insurance premium. Depending on the type of the insurance, you may opt to pay the premium on a monthly or yearly basis. The amount of the premium is determined on the risk and the value of what you’re insuring against at the time and may be subject to changes (e.g. at the end of the term). Remember to make prompt payments to your insurer, otherwise you’ll lose your insurance cover!

Make your claim. If you encounter a misfortune that is covered under your insurance policy, don’t hesitate to put in a claim to your insurer. If you are unsure, refer to your policy document or contact your agent or the insurer directly if you bought your policy online. Provide all the necessary documents and follow the claims procedure set by your insurer, and they’ll pay you as agreed once the claim has been processed.

There are definitely more things that you should know before buying an insurance policy. Read our guides below to learn more about insurance:

What Are The Different Types Of Insurance?

It’s very unlikely for you to need every type of insurance in the market, even if you can afford all of them. But how will you know the exact type of insurance that you need most? Have a look at the table below to help you choose the most suitable policy for your needs.

Protection

Insurance Policy Type	What It Covers
Medical Insurance	Covers and reimburses the costs of your medical bills, inpatient treatments and more.
Term Life, Critical Illness, and Income Protection Insurance	Provide a lump sum or regular payment to you and your beneficiaries in the event of a critical illness, disability, or death.
Personal Accident Insurance	Provides coverage against injuries, disability, and death caused by accidents.
Car Insurance	There are three types of coverage available: Third Party – it provides coverage to your passengers who may be involved in your car accident, damages to other people’s property or another car, but if your car gets damaged or stolen you’ll have to bear the costs yourself. Third Party, Fire, and Theft – similar to Third Party, but this policy covers the costs incurred if your car gets stolen or suffers fire damage. Comprehensive – covers all the above and the damages done to your car.
Home Insurance	Covers the costs of your home repairs if the damages were due to flood, fire, storm, and any other causes stated on your policy.
Travel Insurance	Provides coverage over a range of thing when you travel, such as emergency medical expenses, cancelled or delayed flights, lost or stolen luggage, and personal liabilities should you cause damage to a property or injuries to a person.

Savings & Investment

Insurance Policy Type	What It Covers
Investment-Linked Life Insurance	It’s a life insurance plan that combines investment and protection elements. It provides total and permanent disability cover (TPD), death benefit, as well as investment benefits.
Savings Plan Life Insurance	This is typically a savings plan that is tied with life insurance benefits. It allows you to save for your retirement or even fund for your child’s education, while having total and permanent disability cover (TPD) and death benefit.

If you aren’t sure on how each type of insurance listed above can help protect you and your dependents, here are some of our guides that can help you make an informed decision:

How And Where Can You Buy Insurance?

Traditionally, you can purchase an insurance policy from agents or directly from the insurer. Nowadays, it is becoming more common to use more convenient channels such as online comparison websites like
RinggitPlus.com, or even on insurance websites.

What Are The Important Insurance Terms I Should Know About?

Insurance Term	Definition
Death benefit	Usually seen in a term-life or other life insurance policy, it refers to the amount paid out by the insurer to the beneficiary if you or the person insured) dies when the policy is still active.
Beneficiary	The person that you’ve nominated to receive your insurance pay-out in the event of your death. It can be anyone from your spouse, children, to your parents.
Premium	This is the amount that you pay each month or year for your insurance.
The insured	This typically means you, or a person who is insured under an insurance policy.
Policyholder	The owner of the policy and is responsible for the premium payments. The policyholder is the only person who can authorise changes to the policy, such as changing the name of the beneficiary.
Policy length	The duration of time of which you’ll be protected under an insurance policy.
Excess	An excess is the amount of money that you’ll have to pay out of your own pocket if you make a claim. For example, let’s say the excess set by your insurer is RM200 per claim. If you’re putting in a claim of RM5,000 for the cost of your car repairs due to an accident, you’ll need to pay RM200 and the insurer will pay the remaining RM4,800
Waiting period	Some policies have a waiting period, which means that you’ll have to wait for a certain period of time after you’ve purchased it before you’re allowed to make a claim.
Exclusions	Exclusions refer to the things that are not covered by your policy, which also means that the insurer will not cover the costs incurred if they happen to you.
Value	This refers to the value of what you’re insuring. Simply put, it is the maximum amount that your insurer will pay you when you make a claim. There are two types of value: Agreed value – is the amount that the insurer will pay you as per your policy. This amount is subject to some deductions such as excess. Market/Time value – means that the insurer will pay the value of the insured item based on its condition and age at the time of loss. Replacement cost – means that the insurer will pay for the costs of replacing the item entirely.

For more terms and definitions not listed here, you can check out our:

Insurance Terms and Definitions

How Do You Submit A Claim?

Unlike before, submitting a claim today is a lot easier and faster. All you need to do is get all the documents right. Here are some of the basic steps to making a claim:

Make a police report. This only applies to car accidents, burglary, snatch theft, or stolen items. There is a time limit to make a police report, so it’s advisable for you to lodge a police report as soon as possible.
Check your policy with your agent or insurer if the event is insured. Seek advice from them on the steps that you need to take to submit your claim. If you get into a car accident for example, you need to check the nearest panel workshop to you. Otherwise, your claim may not be approved. Sometimes the insurer will even make all the arrangements for you.
Keep all the documents in one folder for easy reference. Prepare all the required documents to submit your claim, such as a copy of the police report, receipts, and your policy document to speed up the process.
Document the damages done to your property or car by taking pictures of the damages. Note down all the important details that may help your claim, such as the date, time, and the exact sequence of the events. Avoid exaggeration and emotional narrative.

For more information on how you can submit a claim, read our guides below:

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