In Partnership with
The modern woman juggles a multiplicity of different roles at work and at home.
However, in her quest to maintain them, and to nurture and to provide for her loved ones, many often neglect to plan for what might happen to them if the unforeseen occurs.
This is often true for homemakers, who tend to neglect their own protection, thinking that because they are not directly contributing to the family financially, there is no need for any form of protection.
But as a mother, the last thing you want is to leave your family stranded in a difficult financial situation should disaster strike.
Being a mother is basically a job that has no annual, sick or emergency leave, no pay, and no breaks! Here are just some of the responsibilities of a stay-at-home mother like Maria:
Being the main caregiver for the family, Maria contributes greatly in helping the family cut down on the household expenses. Without her, Adam will have to pay for dining out daily, a domestic helper, full-day daycare and transportation for his children.
Here are some of the risks that an adult female like Maria may face:
Long-term illness
Car accident or break down
Maternity complications
Lack of retirement planning
Accidents causing Total & Permanent Disability (TPD)
Death
Is it worth taking out a takaful plan for a full-time homemaker? Although Maria does not generate fiscal income for the household, her contribution to full-time childcare and home keeping should be taken into consideration in the event of her passing, or inability to contribute anymore due to disability or illness.
In such unfortunate events, Adam will have to expand more for the household to hire someone to take over these tasks.
Although Maria does not get a salary every month, her responsibilities and contributions at home have monetary value.
Here’s how you can determine the monetary value of a homemaker:
Childcare
Dinner x4 pax (RM15.90/pax)
Transportation for children
Terms and conditions apply.
1http://www.freemalaysiatoday.com/category/nation/2017/01/02/private-daycare-centres-to-raise-fees-by-20-50/
2https://www.mammam.com.my/menu/malay
3https://www.facebook.com/groups/MsiaPrimarySchParents/permalink/1741028512575508/
When Maria was single, her protection was more straightforward. She was earning an income, and she knew exactly her financial contribution. Being a single woman, there are different areas a takaful plan should cover.
Here are why single women need adequate takaful coverage as much as the next person:
Living longer
Average life expectancy of female in 2010
Average life expectancy of female in 2017
Working harder
Female labour participation rate (FLPR) in 2010
Female labour participation rate (FLPR) in 2016
Even though being single typically means that one has no children or spouse as dependent, but there are still other areas that takaful plans can cover in the event of death and permanent disability:
Single women accumulate debts just like any other adult does. From car financing, mortgages to credit card debts, these debts must be paid to avoid financial hardship for surviving family members, such as aging parents or other siblings.
Final expenses, including additional medical costs and funeral expenses, can also be a financial burden to your loved ones. It makes sense to account for these expenses with a takaful plan.
The sad reality is, the coverage for non-working spouses is often neglected. This is especially true for the lower income families.
However, the truth is, everyone deserves to be covered by a takaful plan, even though they do not contribute directly to the family.
If a homemaker is unable to care for his/her family for a year due to illness, or worse, due to Total & Permanent Disability (TPD), who would be taking over her responsibilities at home?
Adam, as the sole breadwinner, will not be able to quit his job to care for his children or his aging father.
Here are some ways Adam and Maria can ensure their family and loved ones are protected in the event that Maria is no longer able to contribute to the family.
The general rule of thumb of emergency fund is to save at least three months of your gross monthly salary.
However, as Maria does not have a monthly salary, it would be best to save up at least three-month worth of her contributions at home.
Childcare
Dinner x4 pax (RM15.90 /pax)
Transportation for children
The best places to keep an emergency fund is an account that will earn you some returns to offset inflation, and yet still liquid so you can cash out quickly when there’s an emergency. An example of such as account would be an Islamic fixed deposit account which offers 3% per annum on average.
Having another source of income protects your family from the vulnerability of having only one source of income, such as temporary incapacity to care for your family.
Maria is already doing that with her part-time home baking business.
Investment is the most common way of earning a passive income. However, not all investment products can be a good source of passive income.
Here are some common investments that can potentially be a channel of passive income:
1. Shariah-compliant securities and unit trust investments can provide passive yields in the form of dividends. Dividends are basically a share of profits given to you as being a partial owner of the company.
2. Investing in a rental property is one way to produce a regular source of income. However, this will require some management by the landlord (owner of the property) and also a higher capital (down payment and other costs involved in buying a property).
This rider that can be attached to your investment-linked or standalone plan, provides coverage in the event of death or injury caused solely and directly by an accident.
This sum will help the person covered and his/her family manage their financial commitments in the event of Total & Permanent Disability (TPD) for the person covered.
So, how can Adam and Maria determine how much is enough to protect the family from potential risk of Maria incapacitated?
First we need to identify the value of a homemaker’s contribution. Then we need to find out the costs to hire someone as a replacement for those duties.
Here’s a rough estimate in Maria’s case:
Childcare
Dinner x 4 pax(RM15.90/pax)
Transportation for children
Live-in domestic helper
Groceries
Transportation for children
This depends on how long Adam needs to cover these expenses. Assuming that Adam wants to cover the loss of his wife for at least 14 years (until his youngest son turns 16), here’s how much coverage he should get under Maria’s takaful plan.
4https://www.dosm.gov.my/v1/index.php?r=column/pdfPrev&id=cWxzRWcvMTZrWFp4UStqQmp3MG9QZz09
5https://www.thestar.com.my/news/nation/2016/06/28/more-women-working-now-female-participation-up-by-750000-says-najib/
6https://www.dosm.gov.my/v1/index.php?r=column/pdfPrev&id=dkdvKzZ0K1NiemEwNlJteDBSUGorQT09
7https://www.dosm.gov.my/v1/index.php?r=column/pdfPrev&id=SGZCNnMrWW9ZTEdpYys4YW0yRlhoQT09
8http://www.freemalaysiatoday.com/category/nation/2017/01/02/private-daycare-centres-to-raise-fees-by-20-50/
9https://www.mammam.com.my/menu/malay
10https://www.facebook.com/groups/MsiaPrimarySchParents/permalink/1741028512575508/
11http://www.freemalaysiatoday.com/category/nation/2017/01/02/private-daycare-centres-to-raise-fees-by-20-50/
12https://www.mammam.com.my/menu/malay
13https://www.facebook.com/groups/MsiaPrimarySchParents/permalink/1741028512575508/
14https://www.imoney.my/articles/cost-of-domestic-maid
15https://www.dosm.gov.my/v1/index.php?r=column/pdfPrev&id=WnZvZWNVeDYxKzJjZ3RlUVVYU2s2Zz09
16https://www.facebook.com/groups/MsiaPrimarySchParents/permalink/1741028512575508/
Women are generally more exposed to larger health risks than men, and they are also much less prepared, as they typically have less financial resources.
This is surprising, especially when the Malaysian National Cancer Registry17 found more than half of (54.8%) of the total number of 103,507 new cancer cases diagnosed in Malaysia during the period of 2007 to 2011 are of females.
It’s not just about critical illnesses, but a treatment for common illnesses like dengue or even an appendectomy can burn a huge hole in Adam’s pocket.
This risk becomes higher after the age of 30 years old. Cancer is not the only health risks women face.
With Malaysians being the most obese in the region, we are susceptible to high health care cost burden due poor quality of life, cardiovascular diseases, type 2 diabetes and other non-communicable diseases caused by obesity.
Statistics show that the prevalence of obesity was significantly higher in females18 compared to males, putting Maria at a higher health risk.
For Maria, who is the main caregiver of the household, it is crucial for her to ensure she is healthy and medically fit to continue to care for her loved ones. A simple procedure like a laparoscopic ovarian cystectomy (a minimally invasive surgical procedure to remove an ovarian cyst) can cost at least RM16,53019. Without a sizeable emergency fund, Adam and Maria might have to resort to using credit facilities like credit card or personal financing to pay for the medical fees.
As a 38-year-old female, Maria faces increased medical risks such as:
Pneumonia is the number one cause of death among females in Malaysia (14%)20
While cerebrovascular diseases (7.6%) is recorded as the third highest cause of death among females
Ischaemic heart diseases (9.9%) is the second highest cause of death among females
Breast cancer (32.1%)
Colorectal cancer (10.7%)
Cervix uteri cancer (7.7%)
At age 65, women have a higher lifetime risk of Alzheimer’s than men.
Stroke is the second most common cause of dementia after Alzheimer’s disease.
Sickness can affect more than your health. With medical inflation estimated at 11.5% in 2016, and projected to rise to 12.7% in 2017, sickness can have an impact on your finances, too.
Here are the estimated medical costs for the following common diseases for a female of Maria’s age.
Coronary Angioplasty
Coronary Artery Bypass Surgery
Chemotherapy
Radiotherapy
Adult Day Care Centres charge an estimate of RM24,000 annually (20 days-month)
Nursing homes range from RM1,200 – RM2,600 a month for basic care services in a semi-private room
It’s not a secret that as we age, our health tends to deteriorate and our health cost increases. This is even more so for females, especially when they’ve reached menopausal age.
Although many of the non-communicable diseases are hereditary, we can still do our part to minimise the risk, or detect any illness early for a positive prognosis.
Here’s a path to healthier living that Maria can take:
Salt increases our blood pressure. As our blood vessels become less elastic as we age, the risk of hypertension becomes higher.
Increase rich calcium sources in your diet, such as sardines, spinach, broccoli, kale, and low-fat or fat-free milk and yogurt.
Eating about 50 grams a day of processed meat increases your risk of colorectal cancer by 20%27.
Eat no more than 700 grams (raw weight) of red meat per week to reduce the risk of cancer.
Pilates to prevent losing tone and elasticity in muscles. 28
Cardiovascular exercise like zumba to lower the risk of heart disease, reduce your blood pressure and bad cholesterol, and boost your good cholesterol29
Aim for at least 10,00030 steps a day.
Resistance training to prevent muscle loss, the greatest contributor to age-related decline in metabolism.31
To ensure that the family does not suffer financially, Maria should participate in a medical takaful plan with adequate coverage in the event of long-term, or critical illnesses.
Medical and health takaful covers the cost of private medical treatment, such as hospitalisation, surgery and treatment, in the event that you are diagnosed with certain illnesses or are involved in an accident.
This can be a stand-alone plan or can be added to a basic family takaful plan as a rider.
Here are five types of health and medical coverage33 :
Medical and health takaful is offered through individual or group plans. However, an individual plan generally costs more than a group takaful plan. Therefore, you need to be very careful when choosing a cover that best suits your needs by understanding the product features, conditions, benefits, limitations and exclusions of the takaful plan. Don't be pressured into getting more than you need.
Some of the things you should look out for are the room and board limit, annual limit, and lifetime limit.
The Hospital Room and Board coverage refers to the maximum cost of your room and board that you can claim for in a day.
For example:
Limit per day | Maximum days per certificate year |
---|---|
RM150 to RM300 | Up to 180 days |
On the other hand, the annual and lifetime limits dictate how much you can claim in a year and in a lifetime.
The general rule of thumb is to cover 70% of your income for one year, and also a rough estimate of treatment in the event of critical illness.
In the case of Maria, the monthly cost for her contributions to the household amount to about RM3,000, hence she will need the following estimated coverage:
70% contributions in cost annually | Annual treatment cost for critical illness in Malaysia |
---|---|
RM25,200 | RM400,000 |
Check your coverage using this Great Eastern Takaful Critical Illness calculator.
Most people make the mistake of signing up for a medical takaful plan solely based on the contribution. While the affordability is important, it should not dictate the type of plan we should get.
It is more important to get the coverage that you need within the contribution that you can afford.
So, what are the common factors that will affect your contribution?
A co-takaful is an agreement that is set between the takaful operator and you, where a certain percentage of the cost charged for any medical treatments will be shared between two parties.
Full coverage means the takaful operator will fully pay the medical bill on selected charges such as Room and Board, ICU, surgery as well as inpatient and outpatient treatments, within the annual and lifetime limit.
Treatment | Estimated Cost | With co-takaful |
---|---|---|
Lumpectomy (Breast Lump Removal) | RM5,040 – RM6,30034 | You need to pay RM504 to RM630 (10% co-takaful) |
A plan with co-takaful is a good option to help you lower your takaful plan contribution, making it more affordable. However, if Maria wants total peace of mind, it’s good to look into a takaful plan that offers no co-takaful (full coverage) so she won’t be financially burdened when she falls sick.
It’s also important to consider coverage of outpatient treatments before and after hospitalisation, as these can come up to a significant amount.
Typically, a takaful plan covers up to 90 days after discharge for follow-up check-ups.
Some takaful coverage ends at the age of 65 or 70. This exposes the Person Covered to a myriad of risks in their most vulnerable stage of life.
This is why it is important to look for a takaful plan that gives you the longest coverage to at least 99 years of age.
An investment-linked plan with a unit deducting medical rider charges the same contribution every year, whereas a standalone medical plan or contribution paying rider increases its contribution rate as the Person Covered ages.
However, the investment-linked plan may require top up contribution in case of the participant’s account value is less than or equal to zero at any point of time.
The standalone takaful plan is more affordable in the early years but the cost can go up significantly as you age.
Most takaful plans come with a waiting period before you can make a claim.
Here are the types of waiting period and the typical duration from the date the medical plan is active:
Type | From the effective date of the medical plan |
General waiting period | 30 to 120 days |
Normal illnesses | 30 days |
Specified illnesses such as hypertension, diabetes mellitus and cardiovascular disease | 120 days |
Certain illnesses such as cancer | 60 days |
Some of the general exclusions usually included in a family takaful and health protection plans are:
Suicide | Self-inflicted injuries |
Extreme activities such as skydiving or parachuting | Injuries sustained while committing a felony or assault |
War | Pre-existing medical condition |
Cosmetic surgery & circumcision | Pregnancy and child birth |
Dental | Optical |
AIDS, AIDS Related Complex & HIV related diseases | Congenital conditions & deformities |
Note: The list above is non-exhaustive and differs from plan to plan, and takaful operator to takaful operator.
We all know someone who is suffering from cancer or heart disease, or has passed on due to these non-communicable diseases (NCDs). However, we tend to think that this is something that will only befall someone else, not us or someone close to us.
This is far from truth. According to the data from the National Health and Morbidity Survey (NHMS), 73% of the total deaths in Malaysia were due to NCDs, and half of those were caused by cardiovascular diseases.35
Here’s why you need both medical plan and a critical illness plan:
If Maria suffered from a stroke and was hospitalised, she would use her medical takaful plan to cover her hospitalisation and treatments.
This plan covers treatment and room & board of hospitalisation as set out in the certificate.
After spending a few weeks at the hospital, Maria was discharged but she was not fit to resume her role as the sole caregiver of the family and even need the following to help her fully recover:
Monthly consultation and check-up
Physiotherapy
Long-term medication
There are also other hidden costs:
Hidden costs to hire a caregiver/Loss of productivity for the caregiver
Alternative treatments that are not covered by the plan
Additional costs to hire help to take on the duty/contribution of the Person Covered
The lump sum provided by the plan will be able to cover the costs that are not covered by the medical takaful plan.
* Based on exchange rate of US$1 = RM3.95854 as at January 15, 2018.
Post-stroke outpatient care costs are significantly influenced by stroke severity. The cost of attendant care was the main cost incurred during the first three months after hospital discharge, while travelling expenses was the main cost incurred when attending outpatient stroke rehabilitation therapy.
Alzheimer’s Disease/Severe Dementia | Bacterial Meningitis | Blindness | Brain Surgery |
Cancer | Chronic Aplastic Anemia | Coma | 8 Coronary Artery By-Pass Surgery |
Deafness/Loss of Hearing | Encephalitis | End-Stage Kidney Failure | End-Stage Liver Disease |
End-Stage Lung Disease | Heart Attack | Heart Valve Surgery | Major Burns |
Major Head Trauma | Other Serious Coronary Artery Disease | Paralysis/ Paraplegia | Parkinson’s Disease |
Primary Pulmonary Arterial Hypertension | Surgery to Aorta | Full-Blown AIDS | Fulminant Viral Hepatitis |
Loss of Independent Existence | Loss of Speech | Major Organ Transplant | Multiple Sclerosis |
Severe Cardiomyopathy | Stroke | Systemic Lupus Erythematosus with Lupus Nephritis | Benign Brain Tumour – of specified severity |
HIV Infection Due To Blood Transfusion | Motor Neurone Disease – permanent neurological deficit with persisting clinical symptoms | Muscular Dystrophy | Angioplasty and Other Invasive Treatments for Coronary Artery Disease |
Covered events do not just include critical illnesses but also accidents that result in coma, head trauma, loss of hearing and major burns, to name a few.
These diseases can happen to anyone, and the best preventive care we can take to minimise the financial risks are:
Staying healthy to take advantage of No Claim Bonus
Participate in healthy activities organised by takaful operators
Get adequate critical illness coverage
Participate in a takaful plan that allows different coverage for different stages or severity of the illness
17Malaysian National Cancer Registry Report 2007-2011, Retrieved January 24, 2018.
19http://www.iku.gov.my/images/IKU/Document/REPORT/nhmsreport2015vol2.pdf
19https://www.mahkotamedical.com/cost/laparoscopic-ovarian-cystectomy/?pn=0&lang=&discipline=14
20https://www.dosm.gov.my/v1/index.php?r=column/pdfPrev&id=Y3psYUI2VjU0ZzRhZU1kcVFMMThGUT09
21https://kpkesihatan.com/2016/12/07/the-malaysian-national-cancer-registry-report-mncr-2007-2011/
22http://www.moh.gov.my/penerbitan/CPG2017/Prevention%20of%20CVD%20in%20Women%20%202016.pdf
23https://www.sciencedirect.com/science/article/pii/S1201971216310645#tbl0030
24https://www.mahkotamedical.com/cost/coronary-artery-bypass-surgerycabg/?pn=2&lang=&discipline=0
25http://www.federalgazette.agc.gov.my/outputp/pua_20131216_P.U.%20%28A%29%20358%20-%20PERINTAH%20KEMUDAHAN%20DAN%20JAGAAN%20KESIHATAN%20%28PINDAAN%20JADUAL%20KETIGA%20BELAS%29%20%202013%20%28disahkan%20oleh%20kementerian%29.pdf
26http://www.3age.com.my/paying-for-dementia-care-how-to-plan-ahead/
27https://www.cancercouncil.com.au/21639/cancer-information/cancer-risk-and-prevention/healthy-weight-diet-and-exercise/meat-and-cancer/
28https://www.express.co.uk/life-style/health/142057/Fitness-How-to-stay-fit-in-your-forties
29https://www.webmd.com/fitness-exercise/a-z/zumba-workouts
30http://www.bbc.com/news/magazine-33154510
31https://www.express.co.uk/life-style/health/142057/Fitness-How-to-stay-fit-in-your-forties
32https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=116&bul_id=dkdvKzZ0K1NiemEwNlJteDBSUGorQT09&menu_id=L0pheU43NWJwRWVSZklWdzQ4TlhUUT09
33http://www.insuranceinfo.com.my/choose_your_takaful/cover_your_health/medical_health_takaful.php?intPrefLangID=1&
34https://www.mahkotamedical.com/cost/breast-lump-removal/?pn=0&lang=&discipline=0
35https://www.themalaysianinsight.com/s/20706/
36https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4350462/table/T2/
What lies in the horizon for a stay-at-home parent who has dedicated the best part of her life to her family?
Homemakers often neglect their financial security, thinking that her lack of direct financial contribution means there isn’t a need for financial protection in the future.
A homemaker needs a plan to secure her future as much as the breadwinner. A person who has a regular income generally have a financial plan for his/her future, such as Employees Provident Fund (EPF) savings.
However, a homemaker with irregular or no income at all, will depend solely on the breadwinner to support her in the golden years. To avoid unnecessary risks due to divorce, disability or death of the spouse, here are a few options that Maria has to secure her future.
It’s important for the non-working spouse to build a sizeable fund for a financially secure future. This will also safeguard her children from possible drastic transition in life, such as the death of an income-earning spouse.
Here are 5 reasons why Maria should have a financial plan for her future:
To have sufficient income to maintain living standards in the future i.e. retirement
To pay off remaining financings and other financial responsibilities in the absence of the breadwinner
To provide liquidity to family for final expenses such as funeral and medical costs
To protect your net worth in a conservative asset allocation mix
To make donation to the charity of your choice
Most Malaysians depend on their EPF savings for your retirement. However, the sole breadwinner’s EPF savings may not be enough to support both Adam and Maria in their retirement years.
Retirement age | Average life expectancy | Estimated no. of years in retirement | EPF’s minimum savings threshold |
---|---|---|---|
60 years old | 75 years old | 15 years | RM228,00037 |
Terms & conditions apply.
According to the standard set by the Organisation for Economic Co-operation and Development (OECD)38 for retirement income replacement in Asia, both Adam and Maria need about RM702,000 in their retirement fund (about 60% of the last drawn household income, assuming Adam’s last drawn salary is RM6,500).
By just depending on Adam’s EPF, he and Maria run the risk of not being able to replace their income sufficiently to support the both of them in their golden years.
To achieve that 60% to 70% of the household income in his retirement, Adam or Maria need to save a total of 33% of the income as early as possible:
To save the additional 10% to boost one’s retirement income, other than investment products such as securities, unit trusts and Private Retirement Schemes, takaful products can also be used to complement and balance the risk of an investment portfolio.
While the main objective of having a family takaful plan is to protect oneself from unforeseen circumstances, it can also help in wealth accumulation, preservation, and give access to liquidity at the right time.
These savings plans come with short- to long-term savings. Some plans require the certificate holder to contribute for a short-term such as 10 years. This will require a higher rate of contribution. Longer-term plans will likely have lower contribution rate.
* Investment returns are not guaranteed, and will depend on the performance of the underlying assets.
The type of plan you choose, and its benefits will determine the amount of income you will receive during retirement. You can choose to have your income paid every month, every three months, every six months or once a year. A homemaker can also use the following products to save for his/her financial goals:
Product | Potential Returns |
Unit Trust Funds* |
Moderate Risk Fund Purchase NAV price: RM0.3918 Total units: 510,464 Estimated NAV price 3 years later: RM0.4165 Potential profit: RM12,609 |
Amanah Saham Bumiputera** |
Purchase NAV price: RM1.00 Total units: 200,000 Estimated NAV price 3 years later: RM0.675 Bonus: RM0.05/unit Potential profit (dividend + bonus): RM15,343.90 |
Real estate |
Purchase price: RM500,000 Financing amount: RM450,000 Other costs (legal fees, stamp duties, renovation: RM25,000 Selling price: RM650,000 Real capital appreciation = RM175,000 Percentage of capital appreciation: RM175,000 / RM500,000 x 100% = 35% |
Terms and conditions apply.
* Based on Kenanga Islamic Balanced Fund, as of January 16, 2018. Calculated using this calculator.
** Based on dividend and bonus rate of 2016. Calculated using this calculator.
Assuming takaful benefit received is RM200,000
37http://www.kwsp.gov.my/portal/en/member-investment-withdrawal-eligibility
38http://www.theactuary.com/features/2017/07/the-growing-asian-retirement-puzzle/