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Monday, July 13, 2009

LOSING ALL IN GET-RICH SCHEMES.

PETALING JAYA: The lure of making a fast buck or easy money has opened up opportunities for various organisations to come up with ingenious ways to attract the public to invest.

Such schemes, known locally as “skim cepat kaya”, have made Malaysians lose millions of ringgit.

According to the police’s Federal Commercial Crime Investigation Department, there were 17,311 cases opened for investigation last year, a massive jump of 26.6% from 2007.

The department said that one bright spot in all these cases was that actual financial losses were down to RM845mil last year, compared with RM1.9bil in 2007.

Most of these schemes thrived in “grey areas” which can only be loosely regulated despite the best efforts of the authorities to clamp down on culprits.

Many of them operate under the guise of multi-level marketing operations which blur into pyramid schemes, which are illegal.

A market observer pointed out that these establishments would promise returns that even top fund managers found hard to attain in good economic times.

Many of them operate like Ponzi schemes which made no or little actual investments from money collected from the public.

Often in such schemes, the earlier investors would usually get some returns, compared with those who join later.

Surprisingly, many of those who are employed as agents with these businesses do not think such schemes are illegal.

“How can it be a scam when I can make money?” an agent attached to an established restaurant chain said.

The restaurant has half a dozen outlets in the Klang Valley and offers the public membership for a fee which entitles them to make money from eating at the outlets and through referrals.

What makes it interesting is that several of these establishments found taking deposits or cash from the public have been operating for a number of years without ever being questioned by the authorities if their operations are legal.

In the past one-and-a-half years, there has been a significant rise in such operations.

Their aggressive and “successful” marketing approach has even become somewhat of a trend, and has been adopted by many other restaurants to boost sales.

If one were to google the term “scams in Malaysia”, one would find a slew of businesses which concerned citizens have exposed as a “bit dodgy”.

However, the people who run such operations appear nonchalant about the amount of media and Internet attention on their businesses.

They are able to navigate their way around existing laws and capitalise on their marketing strategies before the law catches up with them.

Starprobe decided to investigate a number of these business operations to find out their modus operandi following a number of helpful suggestions from concerned readers and members of the public, especially cases which relate to non-financial institutions.

The response from an official of the Registrar of Companies (ROC) was that it had no jurisdiction to control the activities of such companies.

“If the company is registered with an identifiable business, how they market their products or services is not within our purview,” the official said.

But with regards to companies illegally taking deposits without having an investment licence, Bank Negara has the right to investigate and prosecute them. In fact, from last year until now, 19 companies have been under investigation and raided.

While the authorities are trying their best to enforce the laws, the sheer number of these operations make it an uphill task.

The situation is compounded by having different agencies with different jurisdictions conducting investigations independently, thus not giving a clearer picture.

For example, Consumer Claims Tribunal chairman Rungit Singh said his tribunal has jurisdiction only over consumer complaints and concerns. The tribunal is under the purview of the Domestic Trade and Consumer Affairs Ministry.

“Once a person invests in a scheme, that person is not protected under the consumer laws,” Rungit Singh said.

According to him, consumer laws only cover complaints regarding goods and services and do not have jurisdiction over investors.

And on multi-level marketing, an official from the Consumers Association of Penang said such companies were perfectly legal as long as they were licensed by the Domestic Trade and Consumer Affairs Ministry.

“However, some multi-level marketing operations get into grey areas when the bulk of their sales are not derived from products or services but rather from other forms of collections,” she said over the phone.

She added that a sign of a possible scam was when most of the earnings of the company is derived from activities unrelated to the sale of goods or services.

According to a commercial crime lawyer who did not wish to be named, the law regarding legal and illegal activities was clear.

“However, access to critical information may be time-consuming and the prosecution of those who deliberately go against the law will require substantial evidence,” he said.

The lawyer said there was a need for easier and quicker access to information on registered businesses, possibly delivered via a centralised system and an oversight board with experts for the public to turn to for complaints, advice and information on confirmed scams.

“There is a need for a quicker mechanism to identify and respond to scams before more people lose their money,” he said, adding that many of the scams had invested little in their marketing strategies and did not have a business continuity plan.

The lawyer said it should be noted that there were also a number of people who were either gullible or prepared to take higher investment risks driven purely by greed, despite the best of advice.

A source who tracked such scams said it was near impossible to keep tabs efficiently on them.

“That’s the biggest problem, there are thousands of such scams involving hundreds of millions of ringgit out there that the relevant agencies are not able to track all of them. They’re only able to pursue the ones that have been brought to their attention,” she said.

She added that the answer was not more regulation but more awareness of such scams.

“Awareness is better now than before, we have more inquiries coming in on various businesses,” she said.

(Source: July 13, 2009, The Star Online)

Sunday, May 31, 2009

IS IT TRUE THAT WE DON'T NEED RM 1 MILLION TO RETIRE WELL?

According to an economic specialist, Datuk Prof Ismail Mohd Saleh and an Universiti Sains Malaysia social science lecturer, Associate Prof Dr Kamaruzaman Askandar, we don't need RM 1 million to retire well. RM 120,000 will be enough if we want to retire well. Please click The Star Online for details about this issue.

Is it really true that we just need RM 120,000 to retire well? If it is true, then why do so many experts keep saying that EPF is not enough for us to retire? If it is not true, then what happens to the quality of professors in Malaysia?

If you have any constructive opinions about this issue, please post a comment here. Your sharing here is very much appreciated in advance.

AIA MALAYSIA: FINANCIAL STATEMENTS & INVESTMENT LINKED FUNDS ANNUAL REPORT 2008.

Thursday, April 9, 2009

EMONEY TIPS E-BOOK (APRIL 2009 EDITION): A GROUP WRITING PROJECT BY PERSONAL FINANCE BLOGOSPHERE.

Source: kclau.com

I am glad to announce that the first edition of eMoney Tips e-book is finally published and ready for download for free. Congratulations to all the contributors especially KCLau (Founder and Organizer), Ken Neoh (Cover Designer) and Yow Chuan (Editor).

eMoney Tips is an e-book that shares the ideas and tips of personal finance such as wealth creation, insurance, investment and so on.

As I have mentioned before, the e-book can be downloaded for free by anyone provided that readers don't sell it for money. Readers who have downloaded it can help us to distribute it in whatever ways to anyone provided that all the contents of the e-book remain unchanged.

Please click here to download the e-book. After reading it, please give me constructive comments to help us to improve.

For those who are interested in contributing to the group writing project in the future, please click eMoney Tips for details.

Friday, March 20, 2009

PLEASE BE CAREFUL EVEN YOU ARE HOME.

We will know the importance of insurance in our life after we have watched the video clip above. For details, please click here.

Thursday, March 19, 2009

YOU ARE STILL INSURED EVEN YOU DON'T BUY ANY INSURANCE PLAN.

Does the sentence above sound weird?

When a person doesn't buy insurance like medical card and personal accident, he is still insured. Why? It is because he is the insurance company. He pays his medical bills himself.

Wednesday, March 18, 2009

WHY SHOULD EVERY CONSUMER BUY MEDICAL CARD?

We can be hospitalized due to a critical illness and an accident. An accident can happen any time to anyone. As we all know, a private hospital is a very realistic organization. If we don't have enough cash, the doctors there will not save our life.

We can go to a government hospital. The medical bill there is very economical. However, we need to wait for a long time before we get a treatment. When we are injured seriously, do we have the time and patience to wait? If the answer is no, every consumer should have at least one medical card.

Of course, a medical card doesn't guarantee us an admission to all hospitals without a deposit in Malaysia like what I have explained previously in my post titled WILL A HOSPITAL ACCEPT OUR MEDICAL CARD AS A GUARANTEE OF ADMISSION TO THE HOSPITAL WITHOUT A DEPOSIT? (March 17, 2009). But, it at least helps us to admit to all of the panel hospitals of an insurance company without a deposit.

Tuesday, March 17, 2009

WILL A HOSPITAL ACCEPT OUR MEDICAL CARD AS A GUARANTEE OF ADMISSION TO THE HOSPITAL WITHOUT A DEPOSIT?

A medical card is not a credit card and therefore will not be accepted by some of the hospitals in Malaysia. The medical card is to help panel hospitals to recognize us as policyholders of an insurance company.

Sometimes we have to pay a deposit and our medical bills ourselves first even we are admitted to a panel hospital. Why? To know the reasons, please read my post titled WHAT ARE THE REASONS A POLICYHOLDER CAN'T MAKE A CLAIM FROM AN INSURANCE COMPANY? (March 25, 2009).

Monday, March 16, 2009

IS A MEDICAL CARD THE ONLY CARD WE NEED?

We can be admitted to a hospital due to a serious road accident besides a critical illness.

In the insurance market, there is no one medical card that guarantees policyholders an admission to all hospitals in Malaysia without a deposit. Hospital A is a panel hospital for insurance company X but it may not be a panel hospital for another insurance company Y. In other words, there is no one insurance company which has all the hospitals in Malaysia as its panel hospitals.

So, what are the possible solutions to encounter this situation?

We can buy more than one medical card from different insurance companies like AIA Berhad, ING Insurance Berhad, Prudential Assurance Malaysia Berhad and so on. All insurance companies have their own list of panel hospitals.

Besides that, we should bring alone several credit cards with a high card limit. Why? If all of our medical cards are not accepted by a hospital, we can still use our credit cards to settle our medical bills. After discharging from the hospital, we can claim our money from the insurance companies.

If we don't have medical card and credit card, what we can do is bring along a lot of cash. I personally think that this way is not a good solution as it is no longer safe in certain places in Malaysia if the world economy doesn't recover fast.

Sunday, March 15, 2009

WHY IS IT NOT RATIONAL TO TERMINATE OUR INSURANCE PLANS WHEN THE ECONOMY DOESN'T PERFORM WELL?

When the economy is bad, unemployment rate increases. Many people are jobless. They have no income but they still need to eat. If they still can't find a new job, some of them will be forced to commit crimes like robbery, snatch and others. As a result, crime rate will increase. When crime rate increases, our safety will be threatened. We may become the next victims of robbery and snatch.

Of course, having an insurance plan doesn't reduce crime rate in Malaysia. But, it at least helps us to cover our medical bills when we are injured due to an accident, robbery and snatch.

In sum, it is not wise to terminate our insurance plans when the economy performs badly. If we really can't afford it, we can try to reduce our annual premium by reducing our coverage.

Tuesday, March 10, 2009

THE STRATEGIC PARTNERS OF AIA BERHAD.

There is another good news for AIA Berhad. RHB and CIMB Wealth Advisors are now the strategic partners of AIA Berhad. AmResearch views RHB Bank's bancassurance tie-up with AIA Berhad positively although there are no details on it as yet.

The good news will disprove all the rumours saying that AIA Berhad is going to bankrupt.

Sunday, March 8, 2009

WHICH HOSPITAL SHOULD WE GO IF WE HAVE MEDICAL CARD?

If we don't want to pay our medical bills ourselves and the situation is not urgent, we should go to the nearest panel hospital. If the situation is very urgent, we must go to the nearest hospital and claim our medical bills from insurance companies later.

Saturday, March 7, 2009

A FACT SHEET ISSUED BY AIA BERHAD.

AIA Berhad, as a locally incorporated company under the Insurance Act 1996, has issued a fact sheet which covers its financial position for the financial year ended 30 November 2008.

For the financial year ended 30 November 2008:
  • Total assets as at 30 November 2008 was in excess of RM 17 billion of which more than 97 % of the invested assets are in Malaysia.
  • Profit before tax was RM 428 million.
  • Surplus above the solvency margin requirement as at 30 November 2008 was RM 2.3 billion.
  • Capital Adequacy Ratio as at 30 November 2008 under the Risk-Based Capital Framework was 266 %, well above the regulatory minimum of 130 %.

March 3, 2009

Thursday, March 5, 2009

AIA HAS ASSETS OF MORE THAN $ 60 BILLION.

Here is an article from Reuters about the financial status of AIA group.

TWO MESSAGES FROM CEO OF AIG GENERAL INSURANCE (MALAYSIA) BERHAD.

To know the recent news of AIG General Insurance (Malaysia) Berhad, please click here and here.

Tuesday, March 3, 2009

GOOD NEWS FROM CEO OF AIA BERHAD.

Mr Khor Hock Seng, the CEO of AIA Berhad, has updated us with good news about the AIA group and its future path. To me, it is really a good news for all people including AIA insurance agents, AIA policyholders and even stock market investors in Malaysia. For details, please click here and here.

Saturday, February 28, 2009

TIPS FOR THE BEST MEDICAL EXAM RESULTS.

Okay, we are applying for medical card and we have been told that the insurance company requires a medical exam (usually paid by the insurance company). The exam typically consists of blood and urine samples, blood pressure readings, height and weight measurement and a medical questionnaire. Information from the medical exam will be used by the insurance company to help determine our health class. The health class the insurance company assigns us will determine our premium rates. So, it is very important that we get the best medical results.

The following tips are to help us attain the most favorable and accurate exam results:

  • If we can, it's best to fast for a period of at least eight hours prior to the exam. This step will result in more accurate blood test results. Early morning appointments may be appropriate.
  • If we must eat prior to the exam, no heavy meals and little or no caffeine on the morning of the exam. Decaffeinated coffee and a light breakfast would be best.
  • Stay off salt for 3-4 days prior to exam. This step may have a beneficial effect on our blood pressure.
  • No alcohol for 24 hours prior to the exam as alcohol tends to elevate blood pressure for 12 -24 hours.
  • Get a good night's rest before the examination.
  • If we smoke, don't smoke within 30 minutes of the exam. Smoking tends to constrict artery walls and elevate blood pressure.
  • If we have an acute illness (i.e. the 'flu'), we should consider rescheduling the exam as some acute illnesses affect the urine and blood tests.
  • (For female only) We should tell the examiner if we have our menses as our urine will be affected and a notation can be put on the lab slip.

Source: Modified from http://discussion.lifeinsure.com/

Friday, February 27, 2009

WHAT IS THE MAIN DIFFERENCE BETWEEN MEDICAL CARD AND 36 CRITICAL ILLNESSES?

Medical card is a plan that covers the cost of our medical treatment in a hospital. If a policyholder stays in a hospital and his medical bill is RM 10,000, the insurance company will pay the money to the hospital, not him. In other words, he gets nothing in the end. If he pays the medical bill first, he can make a claim later from the insurance company. In this case, he still gains nothing in the end.

A 36 critical illnesses plan is a policy which provides a financial support to a policyholder who is diagnosed with any one of the 36 critical illnesses. To know the full list of the 36 critical illnesses, please read my post titled A LIST OF 36 CRITICAL ILLNESSES. (January 6, 2009). If he has already bought a 36 critical illnesses plan with sum assured of RM 100,000, this amount of money will be payable to him once he is diagnosed with any one of the 36 critical illnesses. With this amount of money, he can concentrate on getting well. In fact, once he gets RM 100,000, he can spend it in whatever ways he wants including buying the latest model of Honda City.

Thursday, February 26, 2009

WHEN DO WE USUALLY GET OUR POLICY AFTER WE HAVE PAID PREMIUM?

Some of my clients think that they will get their policy on the same day after I receive their premium.

In fact, generally, we can get our policy only after around two weeks. It can be earlier or later. We must understand that only healthy people can buy insurance easily. In other words, not all people can buy insurance especially when they are not healthy. That's why all insurance companies need some time to make sure that all the applicants are healthy. If they are not healthy, insurance companies may require them to provide a medical report to determine whether they are eligible to buy an insurance plan. Underwriters are the ones who assess all the information provided and approve our application. They may need to assess more than several hundred new and old cases a day. After approval, they still need some time to issue our policy.

Actually, we don't have to be worried if we get our policy only after one or two months after the application date. If we submit our application forms on February 26, 2009 and the issue date is March 2, 2009, we are still insured and protected by an insurance company starting from March 2, 2009 although we receive our policy in May 1, 2009, for example.

To know when our protection starts, please read my post titled WHEN DOES OUR COVER START? (February 16, 2009).

Wednesday, February 25, 2009

WHAT IS THE CONSEQUENCE IF WE ARE UNDERINSURED?

When we are underinsured, we are still insured but not protected fully. As a result, our family may still suffer from financial problems.

When we, as the main breadwinners in our family, can't work any more due to a disability or death, the insurance proceeds are the only source of money we have besides our savings in banks and other investments like shares and unit trusts. If we are underinsured, we may need to use our savings to continue living comfortably. We can sell our shares and unit trusts when we need money. However, as we all know, the values of our investments are heavily influenced by the performance of the current market. When the market is bearish, we are not willing to sell them because we may lose a lot of money. Consequently, our wealth accumulation process will be significantly affected.

Tuesday, February 24, 2009

HOW CAN WE USE OUR MEDICAL CARD WITH CARE?

I have explained the importance of using our medical card with care in my previous post titled WHY MUST WE USE OUR MEDICAL CARD WITH CARE? (February 4, 2009). In order to make sure that there is enough limit or fund in our medical card when we need it the most at older ages, we must use it rationally.

What we can do is we just use it when we really have to use it. We should never stay in a hospital just because of a minor illness or injury. Some of us may think that we have already paid the premium and there is no reason why we must not use it whenever we want. In fact, there is a very strong reason why we must use it with care. When we buy a medical card, we pay the premium and are entitled to a lifetime limit of RM 200,000, for example. As long as we are still paying the premium, the RM 200,000 is still ours. So, when insurance companies pay our medical bills, they actually use our money or lifetime limit.

Besides that, we can achieve the objective by bargaining with doctors about our medical bills. How? When we are hospitalized, we tell the doctors that we have no medical card and ask them about the cost of a treatment. After that, we, as rational consumers with good bargaining skill, should use this skill in negotiating with the doctors about our medical bills. They will usually give us a discount if they know that we have no medical card. As a result, we can save our money. After the treatment, we pay our medical bills first and make claims from insurance companies later. Of course, if we are hospitalized due to a very serious injury or a critical illness, we must not bargain with the doctors. In this case, our life is more important.

Sunday, February 22, 2009

WHAT IS THE CONSEQUENCE IF A VEHICLE IS UNDERINSURED?

A vehicle is underinsured when its sum insured is much lower than its market value. When this happens, a policyholder is responsible to bear a certain portion of a loss of his car. For details, please click here.

Saturday, February 21, 2009

IS A RECEIPT WRITTEN BY AN INSURANCE AGENT RELIABLE?

In general, receipts written by insurance agents are unofficial and invalid. In addition, they have no right to write a receipt. Only the receipts printed by insurance companies are official and valid.

That is why insurance agents can't give us official receipts immediately after they have received premium from us. If they can do so, we must be careful and know that the receipts are not valid. If they get our premium and never pay it to insurance companies, insurance companies can't help us much as the receipts are not official.

Friday, February 20, 2009

ARE RIDERS COMPULSORY?

One of my friends asked me the question above. For other insurance companies, I don't know the answer. For AIA Berhad, I am very sure that riders are not compulsory. In other words, we don't have to buy them if we just want to buy life insurance. However, like what I have explained in my previous post titled WHAT IS A RIDER? (February 9, 2009), riders are very important to make our coverage wider and more comprehensive.

Thursday, February 19, 2009

IS A BROCHURE PREPARED BY AN INSURANCE COMPANY RELIABLE?

Like what I have mentioned in my previous post titled MY FIRST INSURANCE CLIENT. (December 29, 2008), insurance companies in Malaysia don't lie because they are closely and fully controlled by Bank Negara Malaysia (BNM). It is some of the irresponsible insurance agents who lie. According to the Insurance Act 1996 (Section 149), besides the proposal form and policy, the brochure must be submitted to BNM for approval if required by BNM. Non compliance with this section carries a fine of RM 1 million.

However, some of the figures like annual return rate of 9.5 % in the brochures are just a projection, estimation or approximation unless the figures are stated in our contract of insurance with the word 'guaranteed'.

Tuesday, February 17, 2009

WHY IS MEDICAL CARD A MUST FOR WOMEN?

According to a doctor from Pusat Rawatan Islam Sdn. Bhd., nearly 98 % of all women have fibroids either small or large. The cost of the operation in one of the hospitals in Seremban was around RM 12,000 in the year of 2007. The cost now will be much higher than the cost in the year of 2007.

A female patient who has medical card doesn't need to be worried about the cost as this risk will be borne by insurance companies.

For details about fibroids, please click the following links:

Monday, February 16, 2009

WHEN DOES OUR COVER START?

The answer for the question above is very simple. Our cover starts from the date on which our completed and signed application forms are approved by AIA Berhad and the appropriate premium has been received by AIA Berhad. So, insurance agents must submit all the application forms to AIA Berhad or other insurance companies as soon as possible so that their clients' risk will be transferred as quickly as possible to AIA Berhad or other insurance companies.

Saturday, February 14, 2009

IS IT TRUE THAT IT IS THE RESPONSIBILITY OF INSURANCE AGENTS TO COLLECT PREMIUM FROM THEIR CLIENTS?

The answer for the question above is no. In fact, it is the responsibility of policyholders to pay insurance premium to insurance companies. However, many insurance agents are willing to collect insurance premium from their clients and pay it to insurance companies.

In order to make sure that our money has already been paid by our insurance agents to insurance companies, we must get an official receipt from them.

Thursday, February 12, 2009

IS IT TRUE THAT EVERY MEDICAL CARD IN MALAYSIA HAS RENEWABILITY FEATURE?

Renewability feature makes sure that a policyholder can renew his policy even if he has made a previous claim. So, does every medical card in the market have this feature?

The answer is no. I know that there is at least one insurance company which offers a medical card without this feature. I don't want to criticize and mention the name of the insurance company here as this is not my purpose of creating this blog.

As we all know, our health deteriorates as we get older. At the age of 60 or more, we face a lot of health problems and we need our medical card the most during this period. If we can't renew our medical card as we have made several claims previously, we have to bear ourselves the mounting medical costs as we have no more protection from the insurance companies. We may say that we can buy a new medical card from other insurance companies. However, they may not accept our application because our risk is already very high.

So, does AIA Berhad offer medical card with renewability feature? The answer is absolutely yes. According to Mr Khor Hock Seng, the CEO of AIA Berhad, the plan (ExcelCare Plus) comes with a renewability feature where the policy will not be cancelled even if a previous claim has been made. The plan will provide continuous protection so long as it is within the benefit entitlement and annual and lifetime limits of the plan. This feature may prove useful when at older ages certain illnesses have a higher tendency of recurrence.

According to the brochure and policy contract of the medical card offered by AIA Berhad, the plan is renewable at the option of a policyholder until the occurrence of any of the following:
  1. non payment of premium or premium not made on time.
  2. fraud or misrepresentation of material fact during application.
  3. this policy is cancelled at the request of the policyholder.
  4. total claims of this policy have reached the lifetime limit specified.
  5. on the death of the insured (hence terminating coverage for dependants too).
  6. the insured ceases to qualify as a dependant.
  7. the insured attains the coverage age limit specified.
  8. termination of coverage for all policies in a certain market and the company withdraws this policy completely from the market in accordance with the Portfolio Withdrawal Condition.
  9. termination of a plan to which ExcelCare Plus rider is attached (if applicable).

If all the situations above don't happen, a policyholder can renew his coverage easily. In sum, it is very important to make sure that our medical card is renewable every year so that we still get the protection we need the most at older ages.

Monday, February 9, 2009

IS IT ALRIGHT THAT WE BUY INSURANCE ONLY AFTER WE GET MARRIED?

Last year, one of my friends told me that we should buy insurance only after marriage because family plans were better than individual plans.

I think it is wrong to say so as we all don't have the ability to predict when a critical illness or an accident will strike. In addition, no research says that humans will bear a higher risk after marriage. We only bear a heavier responsibility after marriage. Any lucky and unfortunate events can happen to us any time.

Is a family plan really better than an individual plan? It all depends on the size of a family.

For personal accident offered by AIA Berhad, a family plan is generally better than an individual plan.

But for medical card offered by AIA Berhad, a family plan is not necessarily better than an individual plan. For details, please click Medical Card (AIA Berhad).

WHAT IS A STANDALONE PLAN?

A standalone plan is a plan that is not necessarily attached to a policy. In other words, generally, we can buy it without having to buy life insurance. Standalone plans do include medical card, certain personal accident and 36 critical illnesses plans.

For details about riders, please read my post titled WHAT IS A RIDER? (February 9, 2009).

WHAT IS A RIDER?

In insurance, a rider is a supplemental agreement attached to and made part of a policy. It is very important to expand the coverage of a policy. Typically, a rider requires additional premium. Generally, we can buy a rider only if we have life insurance.

Our life insurance doesn't cover our medical bills. In order to cover our medical bills, we have to buy a medical card as a rider attached to our life insurance.

Generally, we get nothing from our life insurance if we are diagnosed with a critical illness. If we want to get a sum of money after we are diagnosed with a critical illness, we need to buy a 36 critical illnesses plan as a rider attached to our life insurance.

When we want to get treatment in a clinic, our life insurance and medical card generally don't pay us. So, we need to buy a personal accident plan as a rider attached to our life insurance.

In sum, life insurance is not the only insurance plan that we must have to protect ourselves and our family financially. Riders play a very important role in making sure that we are well protected and fully covered no matter what unfortunate events happen to us.

Some of the riders can be standalone plans. For details, please read my post titled WHAT IS A STANDALONE PLAN? (February 9, 2009).

A CLAUSE TO WHICH WE HAVE TO PAY ATTENTION WHEN BUYING A 36 CRITICAL ILLNESSES PLAN.

I met a prospect. She asked me one question related to 36 critical illnesses plans.

For some of the 36 critical illnesses plans in the market, there is a very important clause we must know.

Compensation will only be made by an insurance company if an insured is still alive for at least 30 days after he is diagnosed with one of the 36 critical illnesses. In other words, he and his family will get nothing if he dies within 30 days after he is diagnosed with one of the 36 critical illnesses. However, this clause doesn't apply to all 36 critical illnesses plans in the market.

So, when we want to buy a 36 critical illnesses plan in the future, we must ask our insurance agent whether there is such a clause in the plan.

WHAT DOES PERSONAL ACCIDENT ACTUALLY COVER?

I find that some people don't really know what a personal accident plan actually covers. They think that personal accident only pays us for injuries that happen on the road. In fact, the coverage of personal accident is very much wider.

According to a brochure by AIA Berhad, personal accident plans generally have the following benefits:
  1. The definition of accidental injury does not require qualifying words of violent external visible means.
  2. Injuries caused by gas inhalation, drowning or similar misfortune with no external sign of injury.
  3. Food poisoning.
  4. Immediate death or injury caused by harmful insects or snake bites.
  5. No exclusion on intoxication.
  6. Injuries resulting from hobbies on any sports or games.
  7. Death or injury by murder or assault.
  8. Injured as a non-participant in riots and civil commotion.
  9. Injuries caused directly or indirectly by fire.
  10. Motor cycling risk.
  11. Injuries while on board as a passenger on scheduled or non-scheduled licensed flights.
  12. Injury while on board as a passenger on military air transport service of any Government anywhere in the world.
  13. Skyjacking risks.
  14. Injury caused by natural perils like earthquake, volcanic eruption, tidal wave, floods or lightning etc.
  15. Injury resulted from radio-active emission.
  16. Grace period of 31 days provided. No worry for due dates.
  17. Renewal bonus of 5 % on the original Accidental Death And Dismemberment sum assured (maximum RM 300,000) for 8 years.
  18. No medical examination is required when applying.
  19. No territorial limitation (except war zones).
  20. World wide claim services.

However, some of the 20 benefits above may not be found in certain personal accident plans. For example, the 17th benefit (renewal bonus) can't be found in Easy Cover PA.

Wednesday, February 4, 2009

WHY MUST WE USE OUR MEDICAL CARD WITH CARE?

We must use our medical card with care because we may not be able to buy another new medical card from the same insurance company or other insurance companies in the future.

When we are old, we need the medical card the most. However, our medical card may not be enough to cover our medical bills as we keep making unnecessary claims when we are young. We may say that we can buy another new medical card. We can only do so if we are still healthy. Although we are still healthy, some insurance companies may not want to cover us because we make too many claims in the past.

Some insurance companies promise us that our medical card is renewable every year but they never promise us that we can buy another new medical card any time. If some insurance companies want to cover us, they will charge a higher premium or impose more exclusions or both.

In addition, if we use our medical card with care, the premium rates of medical card will probably remain unchanged in the future. In other words, our next generation will probably not pay more for the same medical card we have now.

Tuesday, February 3, 2009

WHAT IS THE MAIN DIFFERENCE BETWEEN MEDICAL CARD AND PERSONAL ACCIDENT?

Before we can understand the main difference between medical card and personal accident, we must know the meaning of in-patients and out-patients and how to differentiate them.

An insured is usually considered as an in-patient only if he physically stays in a hospital for minimum six continuous hours upon the recommendation of a physician. He must be a registered resident bed patient being charged for using the room and board facilities of the hospital. Patients who don't fulfil the requirement are considered as out-patients. In other words, out-patients are receiving medical are or treatment without being hospitalized.

Generally, medical card is used by in-patients whereas personal accident is used by out-patients. In other words, we usually use medical card when we have to stay in a hospital for treatment due to serious illnesses and serious accidents. We usually use personal accident if we don't have to stay in a hospital and we receiving treatment in a clinic.

WHAT IS THE COST OF AN OPERATION IN MALAYSIA?

''Critical Illnesses Explained: Second Edition'' is an eBook (e-book) that I downloaded from www.meshio.com last week.

The eBook is very useful as a guideline to all Malaysians. It explains in details the 36 critical illnesses which are covered by insurance companies. To me, the most important information from the eBook is the costs of operations in Malaysia. It is very important to create an awareness among us on how expensive an operation can be in Malaysia.

The author will update his eBook from time to time. So, for those who want the latest version of the eBook, please click http://www.meshio.com/2007/02/free-critical-illnesses-insurance-booklet/.

Monday, February 2, 2009

WHAT DOES FIRE INSURANCE ACTUALLY COVER?

I find that some people always think that fire insurance only pays us for loss or damage to the building caused by fire. In fact, the coverage of fire insurance is very much wider.

Besides fire, fire insurance also pays us for loss or damage to the building caused by
  1. explosion
  2. theft
  3. malicious damage
  4. strike & riot
  5. aircraft damage
  6. impact damage
  7. bursting of pipes
  8. floods
  9. other perils.
The building here includes fixtures, fittings, interior decorations, walls, gates and fences.

Then, is fire insurance very expensive? Fire insurance offered by AIA Berhad is called Home Plus. To me, the premium of the plan is reasonable. If a building (house) is worth RM 100,000, the annual premium is RM 116 (0.116 % of RM 100,000) or RM 119 (0.119 % of RM 100,000) depending on the type of the building.

Sunday, February 1, 2009

IS IT GOOD THAT WE ASK OUR INSURANCE AGENTS FOR A DISCOUNT ON OUR INSURANCE PREMIUM?

Generally, we should not ask insurance agents for a discount because most of the insurance agents don't have a basic salary. In other words, most of them are heavily and solely dependent on commission. When we ask for a discount, their commission will be affected. In addition, insurance agents have to bear themselves any expenses incurred when they need to serve their clients in the future and insurance companies will never subsidize them. So, some of them will not be willing to serve their clients who ask for a discount. That's why we hear a lot of stories on how an insurance agent serves some of his clients badly.

Generally, an insurance agent gets a six years commission from insurance company but he must serve his clients forever. Insurance agents will never get their commission from their clients. In fact, it is the insurance companies which pay them commission. So, if we want our insurance agents to serve us well, we should never ask for a discount. However, a free gift is OK.

WHY IS LIFE INSURANCE A VERY USEFUL FINANCIAL INSTRUMENT IN ESTATE PLANNING?

After receiving insurance proceeds, do beneficiaries have to pay tax?

In general, after a beneficiary receives life insurance proceeds, he doesn't have to pay tax as the money is not a profit or income. It is a compensation. This rule also applies to personal accident insurance proceeds.

Life insurance is a very useful financial instrument in Estate Planning because it is a very liquid asset besides the benefits I have explained previously in my post titled IS IT TRUE THAT RICH PEOPLE DON'T NEED INSURANCE PROTECTION AND FINANCIAL PLANNING? (January 13, 2009). Once an insured dies, the insurance company will usually pay the life insurance proceeds to his beneficiaries in less than a week provided that he has made nominations and his policy is immediately submitted by his family together with related documents like death certificate to the insurance company. The high liquidity of life insurance is very important to ensure that his family daily life will not be affected significantly after his demise. Besides life insurance, a person who has bought personal accident will be compensated immediately after his death due to an accident. In other words, the liquidity of personal accident is also very high.

Life insurance and personal accident are very important especially when we are no longer around because our wealth can't be distributed immediately to our loved ones even though we have a will like what I have explained previously in my post titled FINANCIAL PLANNING SEMINAR (THIRD DAY). (January 21, 2009). Once our wealth becomes an estate, our loved ones have to wait for at least six months before they can get the money. Within the period, they can still live comfortably if we have bought life insurance. For details about the importance of personal accident, please read my post titled WHY IS A PERSONAL ACCIDENT (PA) PLAN VERY IMPORTANT IN OUR LIFE? (January 9, 2009).

It is hard to know how much assets and liabilities we have. We will usually know how wealthy we are after we are no longer around or bankrupt. There was a real case where an old woman got nothing from her husband's will because his assets were not enough to settle his liabilities. In other words, a will just makes sure that the process of transferring a wealth from one person to the other people is smoothly done after all debts are settled. Furthermore, he didn't buy life insurance. As a result, the old woman suffered from two pains, financial (no money to live comfortably) and mental or emotional (loss of her spouse) due to her irresponsible husband. We may say that they had no money to buy insurance. In fact, they lived in a bungalow before his demise. But, the bungalow was already sold to settle his liabilities.

Saturday, January 31, 2009

ARE INSURANCE PROCEEDS A PART OF AN ESTATE AND WHY ARE NOMINATIONS VERY IMPORTANT?

Insurance proceeds are compensation or money received by his beneficiaries after an insured's death.

The answer for the first question above can be yes or no. It all depends on whether a policyholder makes nominations during the application of life insurance. If he does, the life insurance proceeds will usually be distributed to his beneficiaries in less than one week. If he doesn't, the life insurance proceeds will become a part of his estate and the money will be distributed according to his will or the related law. It usually takes at least six months to get the money. This rule also applies to personal accident insurance proceeds.

So, it is very important to make nominations when we are buying insurance so that our family will get the compensation as quickly as possible in order to prevent them from facing the problem of getting the money in a short time. When we are no longer around, six months will be a very long period for those who depend heavily on us such as our surviving spouse and children. They still need to spend money on food, education and others.

For details about the elements of an estate, please read my post titled WHAT ARE THE ELEMENTS OF AN ESTATE? (January 29, 2009).

Thursday, January 29, 2009

WHAT ARE THE ELEMENTS OF AN ESTATE?

The general meaning of an estate was explained previously in my post titled FINANCIAL PLANNING SEMINAR (THIRD DAY). (January 21, 2009).

Generally, a person's estate refers to all of his property like
  • real property / immovable property
  • personal property / movable property
  • tangible personal property
  • intangible personal property
  • property right

Before his estate can be distributed according to his will or the related law, he has to settle all of his debts or liabilities like taxes, loans and others. So, he still has to settle his debts even with a will. Without a will, the distribution of his estate will take a longer time than the time he takes when he has a will.

Real property refers to anything that is permanently attached to a land such as buildings, houses, shoplots and so on (including lands). These items can't be moved.

Anything that is not real property is called personal property. Personal property can be either tangible or intangible. Tangible personal property refers to physical personal property such as cars, watches, jewellery and so on. Whereas intangible personal property refers to anything that we can't touch or hold like shares, bonds, business secrets, copyright, trademarks and others.

Generally, a property right is the legal right to use resources or refers to the ownership of resources like lands, capital and other goods.

The theories of property are very complicated. For details, please click the following links:

Wednesday, January 28, 2009

WHAT WILL HAPPEN TO A PERSON'S ESTATE IF HE DIES TESTATE (WITH A WILL)?

When a person dies testate (with a will), his assets will become an estate. His estate will be distributed to his loved ones only after his liabilities have been settled even though he has a valid will. After his liabilities have been settled, his remaining estate will be distributed according to his will.

Tuesday, January 27, 2009

WHAT WILL HAPPEN TO A PERSON'S ESTATE IF HE DIES INTESTATE (WITHOUT MAKING A WILL)?

When a person dies intestate (without making a will), his assets will become an estate. After his liabilities have been settled, his remaining estate will be distributed according to the Distribution (Amendment) Act 1997 in West Malaysia and Sarawak. Intestate Succession Ordinance 1960 is the law governing intestacy in Sabah. Both laws are only applicable to non-Muslims and non-natives. For Muslims, the law governing intestacy is Islamic Distribution Laws.

For details, please click the following links:

Please read my posts titled WHAT WILL HAPPEN TO A PERSON'S ESTATE IF HE DIES TESTATE (WITH A WILL)? (January 28, 2009) and FINANCIAL PLANNING SEMINAR (THIRD DAY). (January 21, 2009).

Monday, January 26, 2009

AIA TAKAFUL INTERNATIONAL BHD. (ATIB).

On 15th September 2008, AIA Berhad received Malaysia's first International Takaful Operator (ITO) license from Bank Negara Malaysia. AIA Berhad's wholly owned subsidiary, AIA Takaful International Bhd. (ATIB) is allowed to carry out composite (family and general) takaful and re-takaful business in international currencies like USD. ATIB is allowed to offer takaful solutions for the middle and affluent segments of qualified residents and non-residents in Malaysia.

Please click the following links (press clippings):

1. English

2. Bahasa Malaysia

3. 华文

Sunday, January 25, 2009

WHAT IS A NO CLAIMS BONUS (NCB) / NO CLAIMS DISCOUNT (NCD)?

NCB is a bonus or discount given to private car drivers (policyholders) upon renewal of their motor insurance if they don't make any claim. It is a reward to careful private car drivers. Once they make a claim (with exception to windscreen and No-fault Own Damage claim), their NCB will be 0 % and they have to wait for another five years in order to enjoy 55 % NCB.

For those who have more than one car under their name, NCB is transferable from one car to one of the other cars. For example, car A is a new car (high premium) and car B is an old car (low premium) and they are entitled to a bonus of 25 % and 55 % respectively. The owner of these two cars can transfer the NCB from car B to car A to enjoy more discount. In other words, car A and car B now are entitled to a bonus of 55 % and 25 % respectively. Car A and car B must be owned by the same driver in order to enjoy this benefit.

For details, please click the following links:

WHY IS IT VERY HARD TO RENEW MOTOR INSURANCE (THIRD PARTY LIABILITY) IN 2009?

The answer for the question above is very simple. Many general insurance companies suffer from loss due to a continuous fall in average motor premium while the insurers suffer from higher-than-expected claims ratio.

In order to overcome this problem, the insurers have to adopt more stringent underwriting controls on motor insurance including the application of premium loadings. As a result, the renewal and availability of motor insurance in 2009 will be significantly affected.

However, fortunately, motor vehicle owners who find difficulty in obtaining or renewing their motor cover can turn to the Malaysian Motor Insurance Pool (MMIP) to obtain motor insurance protection for their vehicles.

For details, please click the following links:

HAPPY CHINESE NEW YEAR 2009!




Wednesday, January 21, 2009

FINANCIAL PLANNING SEMINAR (THIRD DAY).

After today, I finally finished my Financial Planners Program (FPP). Today, I learnt about Estate Planning. Estate Planning is the most interesting subject in Financial Planning Seminar (FPS).

The speaker who was from AIA Berhad told us a lot of real stories on how badly people will behave when they are discussing the portion they will get from the distribution of their parent's wealth. We can image the real stories by watching the Hong Kong dramas such as 溏心風暴 (Heart Of Greed) and 溏心風暴之家好月圓 (Moonlight Resonance). At first, some people will cry because of their parent's death. However, when their lawyer comes and announces the contents of their parent's will, the first thing they want to know is how much they will get from their parent's will.

From the seminar, I learnt that having a will is very important in our life but it is not the end of the story. Most people including me generally presume that our assets will be automatically transferred to our loved ones after our demise. Unfortunately, there is no such law in Malaysia. Once a person dies, his assets will be frozen immediately even with a will and the frozen assets are known as an estate. Once assets become an estate, it can't be transferred to his loved ones although he has a will until his liabilities like tax, personal loan and borrowing have been settled by his family. We still have to settle our liabilities even though we are no longer around. From here, I know that we can't escape ourselves from paying tax. We can only minimize our tax payment in legal ways. Some people may think that they can transfer all of their assets to their children early before they are no longer around. However, many people are sent to old folks' home after their assets have been transferred to their so-called obedient children. So, we must think carefully when we want to transfer our assets to other people before it is too late.

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