IS IT TRUE THAT RICH PEOPLE DON'T NEED INSURANCE PROTECTION AND FINANCIAL PLANNING?

Some of the rich people think that they don't need any insurance. In fact, insurance is one of the best assets that they should possess because insurance is the only asset which will not be taxed by our government. The money obtained from insurance is not a profit or income. It is a compensation.

Insurance is not useful when we don't need it but it is the best financial instrument in the world when we need it the most. Unlike shares and mutual funds (unit trusts), generally, the amount of compensation from insurance will never be influenced by the performance of the current market.

During good times, rich people will be able to earn a lot of money from their business. However, in times of crisis like what is happening now, any uncertainty can arise. If their business is facing a shortage of capital and they have bought life insurance, they can apply for a loan from their insurance companies which will only charge a quite low interest rate. Actually, they are borrowing their own money. They will be charged an interest and get an interest from their cash value at the same time.

Even though our banking sector is encouraged to lend money to qualified people to stimulate our economy, unfortunately and in reality, most of their loan applications are rejected due to the world economic uncertainty now. If you do notice, there are several advertisements about micro financing recently. The advertisements show that it is not easy to get a big loan from a bank nowadays. Micro financing is a very small loan to micro entrepreneurs (small and medium enterprises or SMEs). According to StarBiz, with minimal documentation, these people can get a loan without collateral. Application process takes between two days and two weeks. Nevertheless, the loan amount is very small such as RM 50,000 at most.