In the 1990s, one insurer ran ads on British television with the tagline ‘For the life you don’t yet know’. We all have a tendency to bury our heads in the sand, assuming life will always be the way it is. Unfortunately, although we live in this bubble of denial, some of us will have to deal with lives we don’t yet know that might involve an unexpected death, a life-changing accident or a long-term illness which could leave us unable to work.
And that’s what insurance is all about: safeguarding the financial future of our families against the unknown. While we hope that we will never need these insurance products, they are crucial in protecting our wealth and giving us peace of mind. A really sound financial plan that protects against all eventualities will involve four different types, which are explained here.
1. Life insurance
What it does: Pays a lump sum (or, less often, regular payments) to your family in the event of an untimely death.
Why it is important: Life insurance protects your family against the financial impact of a breadwinner passing away and takes away financial worries at a time of great stress. It can be used to cover regular outgoings and protect your family’s lifestyle so that they don’t have to make major life changes while they are coming to terms with their loss.
2. Health insurance
What it does: Transfers the risk of incurring hefty medical expenses from yourself to your insurer. If you or a family member becomes ill, treatment is paid for by the insurer (subject to certain predefined exclusions).
Why it is important: Healthcare is extremely expensive and the cost is rising far quicker than inflation. A night’s stay in a private room in KL’s Gleneagles hospital, for example, costs RM230 before you’ve even had any medical treatment. A good medical insurance policy will also give you the choice of the best treatment facilities and world-class medical professionals who speak fluent English.
3. Critical illness insurance
What it does: Pays out a tax-free lump sum if you are diagnosed with a serious medical condition or injury from a defined list or if you are permanently disabled following an injury or illness. Most policies now cover around 50 conditions, including the big hitters of cancer, stroke and heart attack.
Why it is important: Imagine you suffer a heart attack tomorrow, cannot work for six months and have no income. A lump sum payment will cover your living costs in the short term, giving you a financial cushion to concentrate on getting well without having to worry about how the bills are being paid. Many people are tempted to skip on this insurance, but experts believe that you are six times more likely to claim on a critical illness policy during your working life than on a life insurance policy.
4. Travel insurance
What it does: Travel insurance covers unexpected expenses when you are travelling. These could be caused by an accident, a medical emergency, cancellation of your trip, lost luggage, theft and so on.
Why it is important: A medical emergency requiring extensive treatment and or emergency repatriation could easily take you to the financial brink and it is mainly for this reason that I would advise to always have comprehensive travel insurance when travelling, either for business or pleasure.
Expats in Asia generally need international policies which offer global protection and there is a lot of choice out there as well as a lot of considerations to be taken into account. This can make selecting the right products for you tricky. An independent expert with access to all the top providers can assist in the decision-making process and help you get all bases covered for the wellbeing of your family, whatever life throws your way.