How do we come up with Policy Maximization Rate?

Today’s topic is how we do it is we call it a policy maximization rate so as the word itself said, we maximize your coverage and optimizes your premium paid. Most of us are not very experienced in the assurance and selection of the product. So we tend to buy a lot of those that come together, right? And it’s not your fault. It’s the progress of the industry I would say. If you count the cost of insurance, we did the calculation. The investment link, the traditional cost of insurance can be so much cheaper than the term policy. It basically coined this term called policy maximization rate because I was trying to explain to my client, but I didn’t know how that how to put it into a one-liner.

What’s the best PMR (Policy Maximization Rate)?

So what does PMR mean? PMR 125 means that for every one ringgit of premium, you are using it to cover you a RM 125 in terms of coverage. And a lot of people asked if PMR 125 good or no good. So in our past 12 years of experience, we realized that if let’s say when you do the exercise later, I encourage all of you to do it as well. If you find that your PMR is less than 100 normally it’s under-optimized and we’ve seen a lot of investment policy that is skewed towards investment and savings, then it’s neither here nor there. So it will be less than a hundred. If your PMR rate is 100 to 200, it’s somewhat maximized, but can go further. And if your policy is above 200, then the higher the number the better, right? But of course, we also encourage you that you have to make sure that every each portion of your coverage component is being covered. Because we’ve seen people whose PMR is above 200, but some components are zero so you have to be careful on that.

The 4 components

Now here are the 4 components that everybody must have. The first coverage is death and disablement. Surprisingly in Malaysia, these two although are two different coverage, but normally come together, 90% of the time. Unlike if you’ve seen it in Singapore or the US, it could be separately. You can just get death coverage or disability coverage or critical illness coverage. The next component is what we mentioned just now critical illness coverage. The third component is what we called a personal accident and the last component is what we called a medical card. Now, why are these all 4 needed is because these four coverages will cover 95% of whatever coverage that you’ll need out there. A lot of people will be asking what about those advance or early critical illnesses? I will say for those, it will be good to have that means if you have more budget then you can go for it.

Case study

This is what we have to do, so if you noticed, we summarized everything. Basically, he has about SGD 700,000 of death and disability coverage, CI coverage, critical illness coverage of SGD 305,000. Hospitalization coverage of SGD 711,000 and accident of SGD 430,000. So that’s how he actually got about SGD 13,000. So if you translate it’s about RM 38,000 and when we actually helped him to go through this whole policy maximization process, of course, first thing first, we have to understand his needs, then only we can work out what is his true needs coverage. So you can see here, we sort of increased it by one time about SGD 1.3 million, SGD 975,000 of CI (critical illness). For medical, he decides to reduce it slightly because he felt that he has I think three different medical insurance policies. So he said that it’s good to keep two, one in Singapore and one in Malaysia. And of course, last but not least, we have SGD 795,000 of personal accidents. So you notice that we helped him to get higher coverage in this case with lower premiums. So then you will be asking me, how is it possible? So this is what we want to move into the details, after we helped him to maximize, we technically save him about RM 27,000. So, I think this, this part is very interesting, so from SGD 12,000 about SGD 13,000 are kind of premiums and now you have helped him reduce it, but in the meantime, you reduced the premium down to like SGD 3,800 a year, but his protection actually went up.

In a nutshell

As you summarize in a nutshell, is that RM 1 premium you pay a year, how much coverage can you buy? That’s the whole point of the PMR right? By the way, when we talked about the medical card, we are taking the annual limit and not the lifetime limit. This is the part if you’re interested to download the ebook or the template, you can click this or scan the QR code and you can start doing it as per what we shared with you earlier.

If you like the full length video of this sharing “How I Save RM 23K a year for a Client in Insurance Premiums without lowering his sum assured?”, you can watch it here