Insurance protection for young families (Part 1)

HAVING your own family with kids is both exciting and adds more responsibility to your shoulders. I am sure as a parent, you would want the best for your family.

But the thing is, there is no guarantee in life that everything will go according to plan. When unfortunate events happen, you want to be in a position where you are well prepared and not in a position of helplessness.

You can start saving up money for unplanned expenses such as car repairs, home repairs, and medical bills. However, there might be a limit to how fast you can accumulate a substantial sum of money for larger emergency purposes.

Therefore, you can leverage having insurance as your emergency fund. You can pay a small premium to the insurance company in exchange for a huge amount of protection.

How do you plan for your insurance needs as a young family?

 Prenatal insurance

Kuah Soo Yee

If you are expecting a baby, congratulations! Pregnancy is a beautiful experience and you want to focus on baby growth and not on financial worries.

Prenatal insurance ensures both mom and baby are protected, so you can have financial peace of mind. Pregnancy complications, hospital benefits, and others are covered during pregnancy in prenatal insurance. After the baby is born, the prenatal insurance will turn into the baby’s personal insurance.

Can you buy insurance for your baby only after the baby is born? Yes.

However, prematurely born babies, underweight babies and babies born with congenital conditions will face difficulty securing medical insurance. Hence, it is important to secure prenatal insurance before a baby is born.

Medical insurance

Medical insurance helps you pay medical bills at the hospital. Having personal medical insurance gives you the choice to choose the best available treatment in a private hospital.

Otherwise, you might have to resort to treatment at a government hospital if you are financially constrained.

Medical inflation in Malaysia is increasing at an average of 10–15% per year, according to Aon’s 2022 Global Medical Trend Rates Report.

Imagine that a surgery that costs RM30k today will cost RM898k in 30 years with 12% inflation per year. That is why it is important for you and your family to have at least a $1 mil annual limit and an unlimited lifetime limit on individual medical cards.

Critical illness insurance

(Photo credit: Allianz Malaysia)


Many people are confused about the differences between critical illness insurance and medical insurance. Medical insurance pays for your medical bill, and the payout goes to the hospital. On the other hand, critical illness insurance pays you a lump sum of money when you are diagnosed with one of the critical illnesses.

Critical illness insurance payouts serve as income replacement for you so that you can stop working (if you want) to focus on recovery without financial worry.  Also, a critical illness insurance payout can help you pay for expenses that are not covered by medical insurance, such as supplements, Chinese medicine, or other alternative treatments.

Critical illness insurance covers the early, intermediate and late stages of illness. Depending on the severity of the illness, the recovery time required could range from 3 to 7 years. Hence, you can insure yourself and your spouse with adequate critical illness insurance coverage for 3–7 times your annual income. Eg. If you are earning RM100k per year, 5 years of income replacement equals RM500,000 in sum assured of critical illness insurance.

Life insurance

Life insurance pays out a lump sum of money to your family once death happens. This insurance is important in ensuring that your family does not go into hunger and debt after your departure.

How much life insurance you and your spouse need is highly personalised. You can calculate your life insurance needs by considering your family’s financial needs (living expenses, child education, family support), your outstanding loan amount, final expenses (estate administration fee, cremation/ burial), and the legacy that you want to leave behind.

Other than that, life insurance payouts provide immediate liquidity to your family, because all of your assets will be frozen upon your death. The distribution of your estate can be lengthy depending on whether you have written a will. The life insurance payout will be able to support your family’s expenses while you wait for asset distribution to be completed.

Personal accident insurance

Personal accident insurance is important to protect your family when accidents cause disability and render you unable to generate income. The payout of personal accident insurance serves as income replacement for you and your family upon full or partial disability.

All in all, these are five kinds of insurance that are important for young families. Insurance is like your umbrella which keeps you from getting wet during rainy days. You want to ensure your umbrella is fully covered (with the 5 types of insurance mentioned above), or else you will get wet. If you need more assistance with your insurance planning, you can talk to a licenced financial planner. – June 18, 2023


Kuah Soo Yee is a licenced financial planner with IPPFA Sdn Bhd. She is also a certified member of the Financial Planning Association of Malaysia (FPAM).

The views expressed are solely those of the author and do not necessarily reflect those of Focus Malaysia.

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