Q: How do I know whether the agent is authorised to sell life insurance policy?
A: A life insurance agent is a representative of a particular life insurance company and can provide advice on the products marketed solely by that life insurance company. An agent who sells life insurance products is registered with the Life Insurance Association of Malaysia (LIAM) and is required to pass a pre-contract examination, conducted by the Malaysian Insurance Institute. In dealing with a life insurance agent, always insist on seeing his/her authorisation card that is issued by LIAM.
Q: What is the difference between a participating and non-participating policy?
A: A participating (or with profits) policy would enable the policyholder to share in the profits of a life insurance company, while a non-participating (or without profits) policy does not have this right. Profits that are allotted to the participating policyholders are usually in the form of reversionary bonuses or dividends. These bonuses or dividends are not guaranteed and can increase or decrease depending on the investments returns of the life funds.
Q: How does a life insurance company evaluate my risks?
A: The risk class or mortality of a policyholder is determined by an underwriter using the underwriting process through which a life insurance company would decide whether or not to accept a risk. The risk of death is determined by several factors such as age, sex, habits,
personal and medical history, occupation, etc. The life insurance company’s decision to insure your life is based on the information provided in the application form, the medical examination report (if required) etc. Therefore, you should disclose in your application form fully and truthfully all the facts so that the life insurance company can be fair in its assessment of the risks involved.
Q: What will happen to my policy if I fail to pay my premium on time?
A: The policy contract provides for a ‘grace period’, which gives the policyholder an additional period of time after the due date for the payment of the premium. During this period, you can still pay your premium and the life policy still continues to be in force. For monthly mode of payment, the grace period is usually 15 days, while for other frequency of payments (semiannually or annually), it is usually 30 days. When your life insurance policy has lapsed, you may revive or reinstate it to full force within a period of time and under certain conditions such as declaration of your state of health at the time of reinstatement.
Q: Can I get full refund of premium if I cancel my policy within the free look period?
A: Yes, under the free look period, you can cancel your life insurance policy within 15 days by returning the policy to the life insurance company after you have received the policy document. The premium that you have paid (less any medical fees incurred, if applicable), will be refunded to you.
Q: Should I cancel my existing policy and replace it with another?
A: Since buying a life insurance policy is a long-term commitment, it is not advisable to terminate your policy early as you will not receive the total amount of premium that you have paid because the surrender value is usually less than what you have paid.
Replacing an existing policy with another is not in your best interest because the new policy is likely to be at a higher premium as you are older. There will also be an initial cost of writing the life insurance policy for a second time. Additionally, the two-year period of contestability will begin again. Furthermore, the present life insurance company can often make the changes that you want at lower cost to you.
Q: How much will I receive if I surrender my life insurance policy?
A: When a life insurance policy is in force for a number of years (normally a minimum of three years) it would acquire a cash value. The cash value is the “savings” portion of a life policy. It is derived when your premium payments are more than the cost of insurance, whereby the excess goes into a cash value account and draws interest.
If you decide to surrender your life insurance policy, the life insurance company will pay you the cash value, also known as surrender value. You will suffer a loss if you surrender your policy before the maturity period.
Q: Is a life insurance sales illustration a legal document, like a contract?
A: A sales illustration is not a legal document. Legal obligations of a life insurance policy are spelled out in the policy itself. Therefore, a policyholder must read the fine print of the contract carefully to ensure that he/she understands the exact nature of the policy, the risks that are covered as well as the limits or exclusion clauses, before signing the contract.
Q: Should I pay my premiums through the agent?
A: You have the option of paying the premiums directly to the insurance company or through the agent. If you choose to pay through the agent, you must ensure that the cheque is written in the name of the insurance company. You must also ensure that you receive the receipt from the insurance company.