6 Questions You Should Ask Your Takaful Advisor Before You Say Yes
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In 2015, the overall insurance/takaful penetration rate stood at 55.7%, where life insurance takes up 41.2% and takaful covers 14.5% of the market. Close to half are still not covered, making us 19.3% away from hitting the country’s target of 75% insurance penetration rate.
The truth is, we don’t know when our time is going to come, and we don’t know what our health will be like in the future.
We’ve written a lot about the importance of having protection plans. Even if you already have coverage, you should regularly review your coverage to ensure you are not under or over protected.
No one wants to admit that they could fall sick or pass on prematurely. But what’s worse than that is not to have a takaful plan in place, or have inadequate coverage should disaster strike. This could make it very difficult on heirs as not only will debts need to be cleared off but if you also weren’t able to perform the Hajj in your lifetime, expenses for your heirs to do so will also need to be paid for.
Though getting coverage is important, getting the right and adequate coverage is even more crucial. Asking your agents or takaful advisors the right questions will lead you to the protection that you need.
Here are 6 important questions to ask your takaful advisors when you are shopping for a takaful plan:
1. How much coverage do I need?
When determining your takaful coverage, you should consider these two primary factors: How much money your dependents will need to live on after you are gone and how much money will be needed to pay off your current debts, such as home loan(s), car loan(s) and credit card(s).
It’s important to understand that your coverage is an individualised number. You and your takaful advisor must examine your current and future financial situation to determine the best coverage you need.
For a health protection plan, the three most important features you need to ask your advisors are:
| Hospital room and board | This can range from RM100 to RM400. It refers to the amount claimable for your hospital room and board per night. Anything above the limit stated in your plan will not be claimable. |
| Annual limit | This is the total claims you can make in a year. The cheaper plans usually only cover up to RM60,000 a year, while other plans cover up to RM200,000. |
| Lifetime limit | This refers to the total claims you can make over your lifetime (can be up to 99 years old). The lifetime limit can be from RM500,000. |
Different coverage means different costs; which brings us to the next question…
2. How much is the contribution?
The contribution amount differs based on factors like your age, health history, occupation, smoking habit and even gender. The amount also depends on your coverage amount – the higher it is, the higher your contribution will be.
Your takaful advisor may be recommending the highest coverage amount to you, but you should always reach a balance between the coverage amount that you need and the contribution amount that you can afford. As takaful contributions are a long-term financial commitment, you should always take into consideration your ability to make the monthly or annual contribution in the years to come.
As a rule of thumb, your monthly contribution should not be more than 10% of your income but it shouldn’t be much lower than that either. You also want to make sure that most, if not all, of your contributions go towards coverage and not to other add ons that aren’t necessary.
3. Will my monthly contributions increase as I get older?
For takaful plans that offer life protection, your monthly contributions should be fixed and will not change for the duration of the certificate. However, if you fail to pay your contribution and as a result, your certificate expires, you may see your contributions increase if you choose to participate a new certificate later on.
On the other hand, for standalone health protection, your contribution will increase as you age. However, if you prefer to purchase an investment-linked family takaful plan with health coverage as a rider, your contribution should be fixed for the entire certificate duration.
It’s best to check with your takaful advisor as different plans may have different factors determining the contribution amount.
Of course, your life protection plan should be revised according to changes in your life and as such will affect your contributions.
4. Is there co-takaful?
If you are getting a medical takaful plan, you need to be aware of any co-takaful condition in the plan. Co-takaful is when the Person Covered agrees to pay a certain percentage of the costs charged for any medical treatments.
Some plans have co-takaful of 10%, which means the Person Covered will have to pay 10% on medical costs such as surgical fees, operating theatre cost, pre-hospitalisation specialist consultation and post-hospitalisation treatment, while the takaful operator (TO) pays the balance of 90%.
Why get co-takaful? A medical plan with co-takaful would have a lower contribution amount (Tabarru’) than one without. For example, a 30-year-old person would be paying at least RM347 a year for a plan with co-takaful, and at least RM540 a year for a plan that covers 100% of the medical cost.
Keep in mind though, if this same person has to pay 10% on an RM30,000 medical bill he’d end up paying more in the long run.
If the high contribution amount is stopping you from participating in a takaful plan, then a plan with co-takaful condition may be the solution but keep in mind the risk when you do need to call on the plan.
5. What are the exclusions in the certificate?
Every takaful certificate includes exclusions, which are instances in which the TO would not have to pay death benefits or other payouts.
Some of the general exclusions usually included in a family takaful and health protection plans are:
Most people assume that once you have a protection plan, especially a health protection plan, all medical expenses would be covered, or at least partially covered.
Unfortunately, this is not always the case due to the exclusions that are in place in the certificate. A health protection exclusion can be anything from the type of disease to the type of drugs or surgery.
These exclusions can vary from plan to plan, hence it is important for you to ask your takaful advisor what exclusions are included in the plan that you are looking at before you sign on the dotted line.
6. Does the plan offer more than just protection and financial security?
Some takaful plans offer the Badal Hajj service. Simply put, the TO will ensure that your Hajj obligation is fulfilled by an able body or an organisation in the event of your passing or should you suffer from Total Permanent Disability (TPD) before having the opportunity to perform Hajj.
Charity is so entrenched in Islam that Muslims are encouraged to give in times of ease and hardship to see their sustenance increase. The spirit of giving and helping should continue even after death through waqaf.
Waqaf dedicates of a portion of one’s wealth, in this case from your takaful payout to service the community. It gives you the opportunity to give back to community as part of your wealth-sharing goals.
For those who wish to ensure their good deeds will be continued even after their demise, they will need to ask the advisor on the availability of waqaf service. The waqaf service channels an agreed amount by the Person Covered from the death benefit to a waqaf body appointed by the TO.
Both services are available in most Great Eastern Takaful plans. It is best for you to ask you takaful advisor on the availability of this service and how to opt in for it.
With so many variables surrounding takaful plans, you need an expert who can answer your questions and help you run the numbers. The best person to do that is your trusted takaful advisor. However, you will need to do your due diligence and ask the right questions, so your advisor will be able to understand your concerns and recommend the best plan for you.
The six questions above are just some of the questions you should be asking your advisor, but they represent the six most important areas that you need to tackle with your takaful advisor before you sign up for a plan. The more you understand about the plan, the better off you are in managing your protection plans and your money in the long run.
