LIAM president Anusha Thavarajah said on Friday the insurance body supported the separation into RM4, 000 for EPF and RM3,000 for life insurance/takaful.
Previously, tax relief was RM6,000 for EPF and life insurance/takaful combined.
“This tax relief separation, we believe, will give life insurance the right focus and encourage individuals to purchase life insurance as a form of protection that is critical for all Malaysians.
“The savings in the EPF will meet individuals’ retirement needs while life insurance will ensure that the family is financially protected if the breadwinner meets with an unfortunate event,” she said.
Anusha said based on Bank Negara Malaysia's 2016 BNM Financial Stability and Payment Systems Report, the penetration rate of insurance and takaful was about 55% for the past five years.
Eliminating multiple ownership of life insurance/takaful policies, this figure reduces to 35% of population insured.
Out of this, only 4% of households in the lower income group has some form of life insurance/takaful cover.
“Therefore, the separation of the EPF and life insurance tax relief would certainly benefit the rakyat by encouraging them to buy life insurance for themselves and their loved ones and help to increase Malaysia’s insured population to 75%,” she said.
Anusha also said LIAM thanked the government for waiving the stamp duty for the purchase of Perlindungan Tenang products.
“This is extremely encouraging as Perlindungan Tenang products have been specially developed to incentivise the youth, young families and B40 household segment to purchase life insurance,” it said.
The premiums for Perlindungan Tenang products has been specially priced at premiums from as low as RM3 per month.
“We welcome the public private partnership announced by the Government via the setting up of a Critical Illness Fund called Dana Perlindungan Kesihatan Nasional B40,” she said.
Finance Minister Lim Guan Eng, had in his Budget speech, emphasised insurance and takaful could act as a safety net by providing financial support and enabling households to get back on their feet especially for the lower income groups.
“In partnership with the private insurance industry, the Government will pilot a national B40 Health Protection Fund to provide free protection against top 4 critical illness for up to RM8,000 and up to 14 days of hospitalisation income cover at RM50 per day starting Jan 1, 2019. In other words, hospitalisation income of RM700 per annum is available.
Great Eastern Life Insurance has agreed to contribute the initial seed funding of RM2bil to this Fund to be managed by Bank Negara Malaysia.
Lim said the government expects the fund size to grow with more partnership and contributions with other insurance companies.
“This is a big step for Malaysia because for the very first time, together with the Employees Provident Fund and the Social Security Organisation, we are starting a more comprehensive social welfare protection coverage, particularly for the middle- and lower-income groups,” he said.