Definition of Life Policy According to Insurance Act 1996

Just want to share on the Life Policy definition based on the Insurance Act 1996. Hopefully, it will help to have a better understanding on the Life Insurance Policy.

According to Section 2:

A life policy is a policy by which payment of policy moneys is insured on death or survival, and

i)                    Includes extensions of cover for personal accident, disease or sickness

ii)                   Annuity

and excludes personal accident policy.

You can refer to Insurance Act 1996 for more guidelines on the insurance policy.

Payment of Premium for Insurance Coverage

Once the customer buy an insurance policy, he has to pay the premium amount on regular basis depending on the payment mode chosen by him. The available payment mode are:

1.    Single Premium – it is a lump sum premium payment for the whole short term coverage given and it is one time payment for the policy

2.    Annually

3.    Semi Annual

4.    Quarterly

5.    Monthly

To ensure the policy is in force which the coverage is given to the Life Insured, the customer has to remit the premium payment within 30 days grace period from the Next Due Date of the Policy. For example, if the Next Due Date of the Policy is on 01/01/2012, the customer can make the premium payment with 30 days from 01/01/2012. If the customer does not remit the payment within the grace period given, there are two (2) scenarios can happen:

1.    If the policy does not have the Cash Value, the policy status will be changed to lapse status. Once the policy status is lapse, there will be no coverage given to the customer.

2.    If the policy has the Cash Value, the Cash Value will be used to cover for the outstanding premium and will be used until it is fully exhausted. Once the Cash Value fully exhausted, then only the policy status will be changed to lapse. There will be no coverage given to the customer.

There are few payment method which available to the customer to make premium payment to the insurance company:

1.    Auto Debit

2.    Credit Card

3.    Internet Banking

4.    FPX

5.    Salary Deduction

6.    Biro Perkhidmatan Angkasa

7.    Standing Instruction

8.    Cash

9.    Cheque

You have to check and get the advice from the insurance company where you buy your policy on the availability of Payment Method Facility and the best payment method for your policy, so that, it will ensure the policy is in force all the time until maturity or expiry date.

Takaful and Conventional Terminology

The terminology used for Takaful and Conventional are difference. We have to use the correct terminology because it will reflect either it is a Takaful Certificate or an Insurance Policy.

There is few basics terminology which being used in daily insurance business:

No	Conventional	Takaful
1	Policy	Certificate
2	Policy Contract	Takaful Certificate
3	Policy Information Page	Takaful Schedule
4	Premium	Contribution
5	Single Premium	Single Contribution
6	Life Insured	Participant
7	Policy Owner	Certificate Owner
8	Insurance Charges	Wakalah/ Mudharabah Fee*
9	Insurance Risk Premium	Tabarru’ Amount
10	Sum Insured	Sum Covered
11	Investment Account	Participant Account
12	Risk Fund	Tabarru’ Fund
13	Cooling Off Period	Khiyyar
14	Insurance Agent	Wakil Takaful

This terminology must be correctly for Takaful and Insurance.

·         It depends on the insurance company either practising Wakalah or Mudharabah Fee concept

Name the Nominee(s) For Your Insurance.

Once again I ask you, why do you want to buy an insurance policy? Of course, it is for your life protection and to provide financial security to your loved ones if anything happen to you. It can be your spouse, your children, your mother, your father and so on.

 To ensure that the rightful person/ persons received the proceed of your insurance coverage money, in the event anything happen to you. You have to make a nomination to your policy!

What is nomination for an insurance policy?

In a simple layman words, the meaning for insurance’s nomination à It is a person/ persons who you really want to give your insurance coverage money, if anything happen to you.

Based on Insurance Act 1996 – Part XIII Payment of Policy Moneys under a Life Policy or Personal Accident Policy under Section 163 – Power to make nomination

(1) A policy owner who has attained the age of eighteen years may nominate a natural person to receive policy moneys payable upon his death under the policy by notifying the licensed insurer in writing the name, date of birth, identity card number or birth certificate number and address of the nominee-

(a) when the policy is issued, or
(b) after the policy has been issued, together with the policy for the licensed insurer's endorsement of the nomination on the policy.

(2) A nomination made under subsection (1) shall be witnessed by a person of sound mind who has attained the age of eighteen years and who is not a nominee named under that subsection.

(3) The licensed insurer -

(a) shall prominently display in the nomination form that the policy owner has to assign the policy benefits to his nominee if his intention is for his nominee, other than his spouse, child or parent, to receive the policy benefits beneficially and not as an executor;
(b) shall record the nomination and the particulars of the nominee in its register of policies; and
(c) shall return the policy to the policy owner after endorsing the nomination on the policy or by issuing an endorsement to the original policy by registered mail to the policy owner and the nomination shall take effect from the date the nomination is registered by the licensed insurer.

(4) A failure to comply with subsection (3) shall not affect the validity of the nomination if it is otherwise proved that the nomination was made by the policy owner and given to the licensed insurer.
(5) A nomination made under subsection (1) may be in favour of one person or several persons and where there is more than one person nominated, the policy owner may direct that specified shares be paid to the persons nominated and in the absence of direction by the policy owner, the licensed insurer shall pay the persons in equal shares.

Section 166. Trustee of policy moneys.


(1) A nomination by a policy owner, other than a Muslim policy owner, shall create a trust in favour of the nominee of the policy moneys payable upon the death of the policy owner, if-

(a) the nominee is his spouse or child; or
(b) where there is no spouse or child living at the time of nomination, the nominee is his parent.

(2) Notwithstanding any written law to the contrary, a payment under subsection (1) shall not form part of the estate of the deceased policy owner or be subject to his debts.
(3) The policy owner, by the policy, or by a notice in writing to the licensed insurer, may appoint trustees of the policy moneys and where there is no trustee-

(a) the nominee who is competent to contract; or
(b) where the nominee is incompetent to contract, the parent of the incompetent nominee and where there is no surviving parent, the Public Trustee,

shall be the trustee of the policy moneys and the receipt of a trustee shall be a discharge to the licensed insurer for all liability in respect of the policy moneys paid to the trustee.
(4) A policy owner shall not deal with a policy to which subsection (1) applies by revoking a nomination under the policy, by varying or surrendering the policy, or by assigning or pledging the policy as security, without the written consent of the trustee.
(5) Nothing in this section shall prejudice a creditor of a policy owner from applying to the court for a declaration that this section, wholly or partly, is inapplicable to any particular policy on the ground that the premiums under that policy were paid to defraud the creditor.

Section 167 Nominee Other Than a Nominee under Subsection 166 (1)

(1) A nominee, other than a nominee under subsection 166(1), shall receive the policy moneys payable nominee on the death of the policy owners as an executor and not under solely as a beneficiary and any payment to the nominee shall form part of the estate of the deceased policy owner and be subject to his debts and the licensed insurer shall be discharged from liability in respect of the policy moneys paid.

(2) Subsection (1) applies to a nominee of a muslim policy owner who, on receipt of the policy moneys, shall distribute the policy moneys in accordance with Islamic law.

Section 168 Assigned or Pledged Policy Moneys

(1) Notwithstanding a nomination under section163 or the creation of a trust under subsection 166(1), where the policy moneys, wholly or partly, have been pledged as security or assigned to a person, the claim of the person entitled under the security or the assistance shall have priority over the claim of the nominee and subject to the rights under the security or the assignment being preserved, the license insurer shall pay the balance of the policy moneys to the nominee.

(2) Where more than one person are entitled under the security or the assignment, the respective rights of the persons entitled under the security or the assignment shall be in the order of priority of the date on which the security or the assignment was created, both security and assignment being treated as one class for this purpose.

For further details of nomination, you can refer to Insurance Act 1996 by Bank Negara Malaysia.

The nomination can be made during the time you purchase the policy. You can check with the insurance agent which sold the policy to you on how to do the nomination. Normally, the nomination form will be attached together with the proposal form.

You also can make the nomination during the duration of the policy. You also have the option to change the nomination made previously by submitting a new nomination form duly completed, signed and witnessed to the insurance company. The endorsement page will be given to you and you should keep together with the Policy Contract which you received during the time you buy the policy.

So, don’t forget to do the nomination once you buy your policy. It will make your life and your loved ones easier if anything happen to you at later stage.

Job Opportunity!

Do you know that the insurance industry offer you a job opportunity as the Insurance Agent. You can be an insurance agent to earn your living.
There are few advantages as an insurance agent:

1. You can choose either to become a full time agent or part time agent
2. You can decide how much you want to earn every month. It is your own effort to earn RM 5000.00, RM10,000.00 a month!
You decide how much you want to earn!
3. Flexi working hours
4. Training and guidance will be given by the insurance company
5. If you achieve certain target, the insurance company will reward you. Normally, trip to overseas

Before you become an agent, you have to take an examination:

1. If you want to be Conventional Life Insurance Agent – you have to take Pre-Contract Examination For Insurance Agents (PCEIA)
2. If you want to be Wakil Takaful – you have to take Takaful Basic Examination (TBE)
3. If you wan to do Investment Linked Business – you have to take Certificate Examination in Investment-Linked Life Insurance (CEILLI)

Once you decide to be an insurance agent, you have to choose which is the best Insurance Company based on your research in term of the company background, selection of Insurance or Takaful products available etc.

Malaysian Insurance Institute (MII) is the organization which handled the examination. They will announce the schedule and the location available for the examination. You can get the information from the Insurance Company which you has choose to be the life insurance agent or go to MII website, so that, you can check the details of fee amount, etc.

The payment fee for the examination can be paid via cash or credit card for walk in registration, money order, postal order or bank draft which should be payable to The Malaysian Insurance Institute

The minimum requirement to be an insurance agent:
1. PCEIA – SPM/MCE with five (5) passes inclusive of Bahasa Malaysia subject or its equivalent (If Diploma and above, must be academic based)
2. TBE - SPM/MCE or its equivalent (If Diploma and above, must be academic based)

For those out there who want to have a flexi working hours and have more time with your family, you can consider to be a life insurance agent!

Types of Insurance

There are five (5) types of insurance available:
1. Whole Life Plan
Basically, whole life plan gives whole life protection to the Life Covered as long as the premium payment is made for every due date of the policy or, if there is no payment made by the customer, the cash value of the policy, if any, will be used to cover the premium until its exhausted.
The sum covered and with additional bonuses, if any, will be paid to the nominee’s of the policy if death happen, or the payment will go to the Life Covered if there is a Total and Permanent Disability occurs.

2. Term Plan

Term Plan is an insurance policy which give the customers a specific time of coverage of five (5) years, 10 years, 15 years or more. Normally, term insurance will provide the customer with maximum coverage with minimum premium amount depending of the age next birthday of the customer. If the age increase, the premium will be higher. There is no cash value or cash bonuses for term policy once its reach expiry date, unless if there is a product offer by an insurance company with Cash Bonus rider which is an optional to the customer to add in.

3. Endowment Plan

Endowment Plan is a plan which has specific period of coverage time, 15 years, 20 ye,ars or more. Endowment Plan has cash value or cash bonuses which certain plan selected by the customer will be provided with regular cash payout, i.e. every 3 years or 5 years with 10 percent Cash Payout based on the Basic Plan Sum Covered.

4. Single Premium

Single Premium is a plan where the customer will pay one time premium for a short period of coverage, i.e. one (1) year coverage which at the end of the term, the customer will be given the option to receive the coverage proceed or to roll over the sum amount again.

5. Investment Linked

Investment Linked is a Whole Life Policy with an investment elements. The available Units of the policy will be invested in certain fund as agreed between the insurance company and the customer.

Why Do You and Your Family Need Insurance Protection

There are few reasons why you have to buy Insurance protection for you and your family with the current cost of living incusive of healthcare, food, transportation, housing and education costs are high:
1. Healthcare cost now is high and public hospital have to serve so many patients. Private hospital is the alternative available for us to get better and fast service. However, we have to pay more in order to get a better services. With the insurance protection, it will give a peace of mind to you and your family.
2. Now, we have many options for best education for our children but the cost is relatively high. The best thing to do is we have to plan the educational expenses from the time we have children. Insurance provides us to buy education insurance to cater for the need. Normally, it will provide the insurance coverage as well during the period of policy.
3. Insurance company also provide insurance protection for the purpose to cover the breed winner of the family. If anything happen to the main source of income for the family, with the insurance proceed or the policy money, it will reduce the burden during the crisis time.

Buying insurance is not like you buy a normal product which you can see and touch. It is an intangible product. It is your protection for crisis time.