KUALA LUMPUR (Nov 2): The tax relief separation between the Employees Provident Fund (EPF) contribution and the life insurance or takaful deduction into RM4,000 and RM3,000 respectively instead of a combined tax relief of RM6,000 previously, 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, Life lnsurance Association of Malaysia (LIAM) said today.
"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," its president Anusha Thavarajah said in a statement.
For civil servants under the pension scheme, the tax deduction will be up to RM7,000.
She was commenting on measures under Budget 2019, which was tabled by Finance Minister Lim Guan Eng in Parliament today.
Citing statistics in the 2016 BNM Financial Stability and Payment Systems Report, Anusha said the penetration rate of insurance and takaful is hovering at about 55% for the past five years.
"Eliminating multiple ownership of life insurance or 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 or takaful cover.
"Therefore, the separation of the EPF and life insurance tax relief would certainly benefit the people 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 said LIAM is also encouraged by the waiver of 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 Bottom 40% (B40) household segment to purchase life insurance.
"We also 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 added.