Family vector illustration

Understanding Life Insurance: Guide to The Basics of Life Insurance

In this article, we explain term life insurance and its importance, life insurance with critical illness riders and how to choose a suitable plan. Whether you're looking for the best life insurance policy or simply want to learn more about life insurance, this guide is a great place to find affordable life insurance in Malaysia.

How life insurance works?

Policyowner pays premium
The policyowner (customer) will make periodic premium payments to the insurance company for their insurance policy based on their plan coverage
Premiums pooled within the Insurance Fund
The insurance company pools premiums from customers into the Insurance Fund, and uses the Fund to pay for claims.
Insurance company pays benefits to policyowners
In the event of a mishap, the insurance company pays out benefit to the customer according to policy contract.

Type of life insurance plans




Conventional plan

Investment-linked plan


Endowment/Whole Life

Endowment/Whole Life



Insurance protection for a limited period only and benefit is paid out upon death or Total and Permanent Disability (TPD), whichever is earlier

Combination of protection and savings whereby benefit is paid at the end of a specific period, or upon death or TPD, whichever is earlier

Combination of protection and investment whereby premium is used to buy insurance protection and units in Investment Linked Funds managed by insurance company. The value of your policy will depend on the performance of the Investment Linked Funds




Fund type


Non Participating Life Insurance Fund - Investment risk is borne by insurance company


Participating Life Fund - Investment risk is borne by insurance company & Policyowner, through the sharing in profit in the form of non-guaranteed bonuses to the policy; or

Non Participating Life Insurance Fund - Investment risk is borne by insurance company



Pre-fixed or customer-chosen Investment Linked Funds - Investment risk is borne by Policyowner



Supplementary cover
  • Commonly known as riders, these are optional benefits to consider for additional protection

    • Accidental

    • Critical Illness

    • Medical & Health

    • Payor/Waiver Benefits

  • Subject to availability and eligibility of the offered plan

  • Additional premiums will be required



Premium & Coverage

*Buying a life insurance policy is a long term commitment. You should satisfy yourself that this policy will best serve your needs and that the premium payable under the policy is an amount that you can afford.  


  • Premium can be guaranteed and non-guaranteed.

  • Coverage continues as long as premiums are made

  • If there is any outstanding premium and provided the policy has sufficient cash value, the insurance company will use the cash value to pay for the premiums and interest in default to ensure coverage continues. However, once the cash value is exhausted, the policy will lapse 



  • Non-guaranteed premium

  • Premium is allocated to buy units for coverage, while charges are paid by redemption of units

  • Unallocated premium is used to fund commission and insurance company expenses

  • Coverage is subject to sufficiency of units for payment of insurance and other charges

  • Potential upside from underlying Investment Linked Funds

  • Flexibility for Policyowner in fund selection/switching/top-up (i.e. for voluntary savings/investment)/withdrawal





The benefit will be paid in the event of the insured person's death or TPD (where applicable) during the term of the policy


  • The benefit will be paid to the insured person when policy matures at the end of the term, or upon death or TPD (where applicable), whichever is earlier

  • Potential upside for Participating type of policy



For more information on choosing the right insurance plan, please visit or contact our Prudential Wealth Planner/Bank Representative.

Learn more about life insurance in Malaysia in your preferred language:





What is life insurance?

Life insurance is a contract between a life insurance company and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to one or more named beneficiaries upon the death of the insured in exchange for premiums paid by the policyholder during their lifetime.

Why is life insurance important?

Life insurance ensures financial continuity by providing financial support for your family after your death. It is a crucial investment as it helps your loved ones with the following expenses:

  • Alleviating the financial burden on your family

  • Providing financial security and stability

  • Assisting with daily expenses

  • Covering college and university fees for your children

  • Paying off your house mortgage

  • Covering funeral expenses

  • Safeguarding your business, if you own one

  • Supporting your spouse and family

  • Enabling you to leave an inheritance

What is life insurance with an investment?

Life insurance with investment is a policy that combines life insurance coverage with an investment component. The policyholder pays premiums, which are invested in stocks, bonds, or other investment vehicles, and grows over time.

Does life insurance cover critical illness?

A critical illness rider can usually be added on to your life insurance policy. In fact, it’s a good idea to do so as this rider will cover critical illnesses, such as cancer, heart attack, and stroke. If the policyholder is diagnosed with a covered illness, they receive a lump-sum payment.

How do I choose the best life insurance policy in Malaysia?

There are many life insurance products in the market. To make the right choice for life insurance coverage, evaluating your policy objectives and determining the appropriate policy that meets your requirements is important. In addition, opting for a reputable provider when purchasing life insurance is also advisable. To achieve this, our wealth planner can assist you in identifying your requirements and suggesting the most suitable policy option.

Does EPF provide life insurance?

Malaysia’s Employee Provident Fund (EPF) does not provide life insurance coverage directly. However, EPF members can use funds in account 2 to purchase a life insurance policy from an insurance provider. Secure the future of your loved your loved ones with PRUGuard Life, Prudential’s life insurance in partnership with EPF.