Money Matters

1. We all want financial freedom. The question is, just what is Financial Freedom?
2. It varies from person to person. Some say it’s when passive incomes surpass living expenses. Some say, it’s when there’s no debts to pay. Others define it as when one does not have to work for a living.
3. All are correct from their perspective. To each, their own.
4. The journey to financial freedom has many routes. Just like climbing a mountain, we always start from the bottom.
5. Fundamental to a proper financial plan, is having proper protection via a suitable insurance policy. As a bare minimum, Medical and Debt Cancellation Plans are of utmost importance.
6. With so many Medical plans in the market, just how does one choose a suitable plan?
7. Well, as a general guide, these matters should be considered before a decision is firmed up :-
8. - Choose a plan that is renewable at your option. Imagine the nasty surprise where an insurer kicks you out just when you need it the most.
9. - Study the amount for Internal Limits, if any. These are restriction in usage for specified illnesses such as Outpatient Cancer and Kidney Dialysis, which could be much lower than limits for all other illnesses. Avoid policies that discriminate. If unable to, then ensure that limits are as uniform as possible.
10. - Evaluate whether a policy has any Deductible or Co-Insurance elements. In the case of the former, the insured’s liability is fixed while most Co-Insurance plans go along shared percentage on the total bill.
11. - Do you want a policy that grows to keep up with inflation or one that remains stagnant? What RM100k can do today is superior to RM100k a decade into the future.
12. The next important policy is a Debt Cancellation plan. As the name suggests, the objective of this plan is to ensure debts taken by the insurer is settled in the event of a triggering event and the family are in not burdened by the outstanding loan.
13. Most banks offer this type of protection in the form of Mortgage Reducing Term Assurance (MRTA) when borrowers take on housing loans. However, most borrowers are not aware of what is known as Mortgage Level Term Assurance (MLTA).
14. The MRTA shadows the loan value while a MLTA remains constant despite the reduction in loan with each instalment paid. For those who wish to purchase more than one property, MLTA is a better option where one policy can be tailored to cover a few loans. MRTA on the other hand, varies according to number of loans and can prove to be confusing at times.
15. A very important element when taking MRTA/MLTA is the inclusion of Critical Illness (CI) coverage. Most standard policies cover only Death and Disability as triggering events. The statistics of falling into serious illness far outweighs the odds of meeting an untimely Death.
16. With insurance policies put into place to secure the income source, the next step of Savings and Accumulation can be put into motion. We will explore that topic in the next article.