Understand the Insurance YoungMoneyTipscom
Summary of responses
Based on our questionnaire result, we can summarize that most of the fresh graduates currently have not purchase any insurance. There is more than 40% of the people said that insurance is not affordable for them now at this stage. This is because the monthly salary of a fresh graduate is sometimes not even sufficient for them to cover their daily living expenses, not to mention to have extra savings to purchase insurance and it will definitely be a burden to them. On the other hand, if the insurance is affordable and the financial condition is allowing them to do so, everyone will buy the insurance for secure. Undeniably, the reality is that insurance is costing a lot of money and people would have to pick and choose which one is the most suitable for them in all aspects.
Also, fresh graduates do not purchase any insurance is due to the lack of value in money as they usually do not see the value of buying insurance. They doubt the value of insurance and consider spending money on insurance as a waste. Other than that, there are a group of people who are unsatisfied with their previous insurance policy or provider, causing them to feel that the insurance company is not there to help them when they need it. For example, a person only finds out that their policy does not cover what they really need when they are going claim for losses and damages.
Understand the insurance from today!
First of all, we need to understand insurance. Basically, it is an arrangement made by a company or the state undertakes to provide a guarantee of compensation for specified loss such as damage, illness, or death in order to return for payment of a specified premium. In simple words, insurance can be explained as a contract which people receives financial protection against losses on terms and conditions from an insurance company.
Types of insurance
Life is full of uncertainties. Misfortune always strike when you are least expected. To safeguard the future of ourselves as well as our family, planning for adequate protection should be our top priority. Basically, there are 2 types of insurance which are life insurance and health insurance. It is a simple insurance plan that offers flexibility and options to select the type of coverage and amount of protection you need.
For the life insurance, it is a policy with a set duration limit on the coverage period. Once the policy is expired, the policy owner has the right to decide whether to renew the life insurance policy or to let the coverage end. This type of insurance policy basically functions as permanent life insurance which duration extends until the policy owner reaches death.
Next will be the health insurance. It is a way to pay for health care. Health insurance coverage covers the cost of an insured individual’s medical and surgical expenses. For example, you choose a policy and agree to pay a certain amount or premium in each month. In return, your health insurer agrees to pay a portion of your covered medical costs.
Is insurance necessary for fresh graduate?
Fresh graduate will not spend money to purchase the insurance and most of them do not plan for their future. From the respondents, they claimed that the monthly incomes are not adequate to pay for the premium although it is only occupy portion of their salary. They have not much awareness regards the policy and benefits beyond the insurance. On the contrary, they prefer to spend their money in entertainment activity, such as movie and shopping. They do not think that insurance is an essential product and should be come in prior. Majority of them are not even educated regards the importance of insurance, so they will not approached to any of the relevant insurance agency.
Firstly, all of the fresh graduates should practice to purchase the insurance just in case of a person falls sick, or met an accident, the hospital bills can be claimed. They are advised to save portion of their income to pay for the premium. The family will not have to worry about the hospital bills if the unfortunate incidents come to them. In fact, when a person becomes disabled due to illness or accident, it will cause financial burden to their family. Indeed, this is a long term investment to own the potential benefits and the way to ensure the life of future get secured. For example, under the Mortgage Reducing Term Assurance (MRTA) policy, the insurance coverage will pay off the balance of the loan in the commercial bank if the insured applicant faced total disability or death. This may boost up the confidence and eliminate worries of the family members.
What is the first policy fresh graduate should buy?
There are a lot of policies offered by different insurance company and which one they need to choose? Most of the fresh graduate will feel uncertainty when they want to purchase insurance and do not know what type of policy is most suitable for them and apparently this is caused by the very little knowledge and information on insurance they received throughout their lifetime.
First, they need to familiarize with what kind of policy they need and what are the choices available out there. Different insurance come with different policy to fulfill the demand of their clients. Thus, the fresh graduate should read through the term and condition accordingly before they decide to purchase any of these medical card, personal accident policy or life policy. Generally, the medical card provides coverage for hospitalization and surgical expenses incurred due to illness or accidental injury. Also, they have to make the declaration about their current healthy condition and better attached along with latest medical checkup report as references. This could avoid the insurance company refuse coverage for health reasons. For example, the cardholder is able to waive the hospitality cost if he visit to the panel clinic or hospital.
How does the policy sufficient for them?
Fresh graduate is not able to afford too much insurance including life insurance and health insurance respectively in the same period of time. However, it depends on the financial ability of the particular fresh graduate. As mentioned, different people might need different insurance policy as they aim for different customer sources as well. For example, those individuals who work under high risk occupation such as police force and firefighters are highly recommended to sign up for life insurance. Otherwise, for those loan applicants with banks should purchase the insurance which namely as MRTA or MRPA respectively. Next, the parents who have children can consider purchasing the education insurance or saving insurance which would develop their repayment capacity someday in future.
The comprehensive life coverage that includes life insurance would be ideal option for the fresh graduates as the compensation amount is payable immediately once disabled or premature death happen.
How much the cost of the premium should be pay?
Fresh graduates are advised to set up their own financial planning in order to manage their personal monthly income. They should have a distinctive mindset that the expenses must not exceed the amount they earn now. Thus, the budget control should be practiced to ensure the money is use in the right place. For example, a fresh graduate who has a monthly income of RM2,800; he should consistently to make 30% of his/ her income for saving purpose before withdrawal. From the portion, it is suggested that 10% of it can be used to pay for the premium of the insurance. This would develop the good habits of they start planning for their future.
In short, everyone including fresh graduates should purchase insurance for secure. Life is unpredictable and we cannot predict our destiny with certainty. Hence, we cannot prevent the occurrence of accident and premature death. However, we can minimize the financial problem by purchasing insurance. It ensures your future life gets secured and guaranteed. In addition, fresh graduate who purchases insurance can start to eliminate dependency on the parents. At the death of the husband or father, the destruction of family needs no elaboration. Similarly, at destruction of property and goods, the family would suffer a lot. It brings reduced standards of living and the suffering may go to any extent of begging from the relatives, neighbors or friends. The insurance is here to assist them and provides adequate amount at the time of sufferings. Last but not least, by purchasing insurance, the good habits of saving and control their monthly living expenses among individuals are encouraged and strengthened. It is just like a saving tool, you need to save part of the salary to pay for the premium save for the future and also for the unforeseen disaster.
For further inquires please contact Maggie Ser, District manager of American International Assurance Berhad (AIA).