On July 12, EPF launched i-Lindung, an initiative that allows its members to buy life and critical-illness insurance policies at affordable prices. As insurance is a key component of proper financial planning, and one should have sufficient life, medical and critical-illness coverage, this is a positive development.

Here are some pointers you should take note of when considering whether or not to apply for i-Lindung to boost your existing coverage.

1. The insurance companies and their products

There are presently three insurers offering 10 different insurance products under the i-Lindung initiative, namely FWD, ETIQa, and Prudential.

Of these 10 products, six are takaful while the remaining are conventional. Five offer both death and total permanent disability (TPD) benefits, while the others are critical-illness policies.

These policies differ in terms of maximum sums assured; number of critical illnesses covered; and the policyholder’s age of entry. The findings can be summarised as follows:

2. The premiums

Premiums are calculated based on one’s age of entry. If you are 30 this year, your premium would obviously be lower than someone who turns 50.

Based on the writer’s current (undisclosed) age, here is a summary of what the premiums for the respective products could look like:

Under i-Lindung, you are allowed to buy all 10 products. In the above example, the policyholder could add on RM700,000 in death and TPD benefits, as well as RM400,000 in critical-illness coverage with an annual premium of RM1,884 or RM157 monthly.

It isn’t easy to find such deals with local insurers today, which makes this well worth considering.

3. i-Lindung vs individual life policies

So, should you choose i-Lindung over individual life-insurance policies? The answer is no. Instead, it would be ideal to have both.

Firstly, i-Lindung offers group policies, so applicants are not required to undergo medical examinations to buy them. So, if you have pre-existing conditions, you should check out the deals at i-Lindung to secure yourself additional coverage.

This is in contrast with individual life-insurance policies, which are solely underwritten for each applicant and should, therefore, be prioritised. The i-Lindung platform should be used as a “sweetener” to your existing individual policy.

Also, the maximum tenure of individual policies could go as high as 99 years, which is higher than the maximum tenure of 60 or 70 years offered by i-Lindung.

4. Tax planning

One is eligible to obtain tax relief for products bought under i-Lindung. But currently, the only payment method for these products is deduction from one’s EPF Account 2.

Let’s say you are self-employed and do not contribute to your EPF. Should you wish to buy all 10 products at the annual premium of RM1,884, what you could do is voluntarily contribute RM6,280 into your EPF, of which RM4,386 (70%) would be credited to Account 1, and RM1,884 (30%) into Account 2.

As a result, you could obtain:

• RM4,000 in tax relief for your contribution into your own EPF account;
• additional dividends from the RM4,396 contributed into your Account 1; and
• tax relief for life and medical insurance premiums.

Thus, your net premium for the 10 insurance products would be as follows:

In essence, the more income you make, the more tax relief you would receive.

Find out more about i-Lindung here or by contacting the hotline at 03-89224848.

This article first appeared in KCLau.com. Ian Tai is a financial content writer, dividend investor, and author of many articles on finance featured on KCLau.com in Malaysia, and ‘Fifth Person’, ‘Value Invest Asia’ and ‘Small Cap Asia’ in Singapore.