Why I Signed Up for Life Insurance in Malaysia

💬 Why I Signed Up for Life Insurance in Malaysia (and What I Learned)

Me:
I’ve been wondering — why don’t people get life insurance policies that are linked to stocks? Like investment-linked life insurance?

Friend (Financial-savvy):
Ah, you mean products like variable life insurance or investment-linked insurance. There are quite a few reasons why people — especially in countries like Korea — tend to avoid them.

Me:
Really? What’s the issue?

Friend:
Well, here’s the thing:

• These products are complicated and hard for the average person to understand.
• The fees are high, especially in the first few years — a lot of what you pay doesn't even get invested.
• The returns often underperform compared to just investing in ETFs or stocks directly.
• There’s little flexibility — if you cancel early, you could lose a lot.

Me:
That makes sense. I noticed in Korea, people don’t seem to have life insurance under their own name much.

Friend:
Exactly. In Korea, insurance is often seen as purely for protection, not investment. Parents might get a policy for their child, but young adults rarely take out their own — especially not investment-linked ones.

Me:
So… did I make a mistake? I’ve been paying RM1,500 per year for two policies here in Malaysia, mainly because they offer tax relief.

Friend:
Actually, you made a smart move — not a mistake at all.

💡 Why Your Life Insurance in Malaysia Makes Sense:

• Tax Benefits: In Malaysia, you can claim up to RM3,000 in tax relief for life insurance. At a 21% tax rate, paying RM1,500 could save you RM315 in taxes.
• Protection: Life insurance still serves its original purpose — protecting against death, illness, or accidents. Especially in Malaysia, where healthcare isn’t always free, that matters.

Me:
I see. For context, I'm paying for:

• Great Eastern All Rounder – RM500/year (starting Dec 2024)
• Prudential PRUMax Cover – RM1,000/year (since Dec 2021)

Friend:
Perfect — here’s a breakdown:

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🔹 Great Eastern – All Rounder

• A pure protection policy combining life, medical, critical illness, and accident coverage.
• No investment component, which makes it simple and affordable.
• Great if you want comprehensive protection without worrying about fund performance.

🔹 Prudential – PRUMax Cover

• An investment-linked life insurance policy.
• Part of your premium goes into a mutual fund or selected portfolio.
• You’re over 3 years in — past the worst-fee stage. But now’s a good time to check the fund’s performance.

Me:
Should I cancel PRUMax if the return isn’t great?

Friend:
Not necessarily. You’ve passed the early high-fee phase. I’d say keep it until at least year 5, especially with the tax relief. But yes — if the fund is underperforming, consider adjusting or reallocating it.

Me:
Got it. And what about the Great Eastern one?

Friend:
Since it starts in December, check for any overlapping coverage with PRUMax. If they complement each other, it’s a good combo — basic investment + full protection.

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Me:
Awesome. I thought I’d wasted money, but now I see it’s not that bad.

Friend:
Not bad at all! You’re using insurance for both protection and smart tax planning. Just review it yearly, and you’ll be in good shape.