Insurance is the transfer of risk by an individual/company/organisation (policyholder/policyowner) to the Insurance company. In return for coverage of the risks, the Insurance company receives from policyholder a sum of money called Premium. In the event of a loss suffered by the policyholder, the Insurance company will compensate for the loss or damage.

Taking Insurance is another aspect of financial planning, which helps you in times of dire need. For example, buying a life Insurance policy ensures that your family has adequate cash and income after your demise. The proceeds from a life Insurance claim can help in paying bills, taxes, your child's education and also maintain your beloved's standard of living.

Another example is buying Insurance policies for your home (i.e Basic fire policy, houseowner policy, householder policy). These policies can cover your house and its contents against losses in the event of fire, explosion, damage due to flood (amongst others).

Basically, proceeds from an Insurance claim will help you ease your financial hardships.

There are two main types, i.e Life Insurance and General Insurance.

Life Insurance - Insures you/your life against any mishap up to a certain agreed amount, i.e the Sum Insured. The period of coverage is usually more than a year. Premium payment can be made monthly, quarterly or annually.
Normal risks covered are :
- Death
- Income during retirement
- Illness
- Disability

General Insurance - Insures you against losses to your properties and others than those offered by life Insurance business. The period of coverage is usually one year which normally requires a one-time premium payment.
Normal risks covered:
- property loss, e.g Stolen car or burnt house
- accidental death or injury
- liability arising from damage caused by yourself to a third party.

There are FOUR main principles of Insurance:

1) Insurable Interest
This means that you as the policyholder should have an interest (e.g. Ownership) over the property insured. Thus, when a loss or damage occurs to the property or life insured, this would result in financial loss to you.

For example, when you have sold your car, you should not insure it anymore as the car no longer belongs to you. Thus, you do not have anymore insurable interest on it.

2) Utmost good faith
An Insurance contract is a contract of good faith. Thus, you should disclose all the material facts when buying a policy. If you should fail to disclose material fact, the policy may become invalid.

3) Indemnity
Only applies to a claim where there is physical damage to a property, where the loss can be quantified in monetary terms. You cannot "profit" from an insurance policy. The Insurance company will pay or 'indemnify' you to the position you were in before the loss.

4) Contribution
It is not necessary to buy more than one policy to protect a particular property. Even if there are more than one policy, you can only make one claim in the event of a loss. The amount payable will be contributed by the Insurance company involved. However, for life insurance, you may buy more than one policy.

Takaful is a protection plan based on Shariah principles. You contribute a sum of money to a common takaful fund in the form of participative contribution (tabarru'). There is an 'aqad' or contract whereby you undertake to become one of the participants by agreeing to manually help each other, should any of the participants suffer a defined loss.

A unique feature of a takaful plan is the sharing of surplus of the fund between you and the takaful operator, based on a pre-agreed ration. You are entitled to this surplus if you had not made a claim during the period of takaful.

1) Check your policy/certificate - check whether the loss or damage is covered. Check on exclusions or any excess, i.e Proportion of the loss you will have to bear.

2) Notify your broker/insurance company/takaful operator as soon as possible. Check the time frame for claim notification stipulated in the policy. Request for a claim form and seek advice on the documents required to support your claim.

3) In some cases, you may be required to make a police report. For a motor accident, a police report must be made within 24 hours.

4) Provide complete and correct information - incorrect or incomplete information may cause delay in processing your claim.

5) Keep copies of all documents such as bills, reports and correspondence.

6) Communicate frequently. Keep in regular contact with your broker/insurance company/takaful operator until the claim is resolved.

7) If the offer made does not meet your expectation, you may negotiate with your insurance company or takaful operator. Both parties should undertake negotiations in good faith.

If you are not satisfied with the product/services of your insurance company or with the rejection or offer of settlement of a claim, you should first try to resolve the complaint with the Complaints Unit/Claims Unit of the insurance company concerned.

If you are still not satisfied with the outcome of the complaint resolution, you can write to the Financial Mediation Bureau (FMB) or Bank Negara Malaysia (BNM). This is handled free of charge. Do attach a copy of the decision letter of the Insurance company/Takaful operator when writing to FMB/BNM.

If you are submitting your complaint to FMB, it must be done within six months from the date of the Insurance company's final decision. The FMB handles disputes between claimant and their own or third party insurance company.

However, the FMB will not handle disputes involving pricing of insurance products and underwriting issues, fraud cases or disputes that have been or are referred to the court.

Complaints referred to FMB are subject to the following limits:
- Up to RM200,000 for motor and fire insurance policies
- Up to RM100,000 for other types of insurance policies
- Up to RM5,000 for third party property damage

For cases not within the purview of FMB, you may refer them to BNM.
(For further info on FMB, please refer to their website - www.fmb.org.my)

Useful Links
a) www.insuranceinfo.com.my
b) www.bnm.gov.my

Note : The above FAQs are excerpts from Insuranceinfo site. The FAQs only serve as a guide for general information only. As a guide, it does not contain exhaustive advice or information and is not intended for use in settlement of disputes. Please contact your insurance company/broker/agent for a more thorough explanation.