[GST] How it affects our Life Insurance policy? (March 2015)

Everyone cannot runaway from Goods and Services Tax (GST) which is going to be implemented starting 1st April 2015. How about our life insurance policy? How is it going to affects our policy then? All types of coverage also subject to GST?

Unfortunately, most of our life insurance policy coverage also will be subject to GST charges. It depends on what type of life insurance policy you mention. It could be pure life, endowment, child education, medical and health, personal accident or annuity plans.

In summary, below table shows you what type of coverage is subject to GST:

Actually, how to calculate the additional GST charges?

The GST charges will imposed on those insurance charges and all other policy fees as mentioned above. Example, for standalone medical card, if the annual premium is RM1,000, then the revised premium including GST would be RM1,060 (RM1,000 + RM60 GST).

But, it's not so straight-forward for investment-linked plan (ILP) which having other non-life riders attached also. If the monthly premium is RM100, many people think that the revised premium would be RM106. Is it correct? NO. The RM100 is the premium you're paying, but the insurance costs is forms a portion of it only. For ILP, you have to determine how much is the insurance cost for each type of coverage, then only you can calculate how much is GST being charge.

Are there any changes to my insurance premium payment?

If your coverage is subject to GST, it definitely will charge you for it. But, whether should you pay more or not, it depends on what type of policy are you having. If it was a standalone medical card or non-investment link policy, you are required to pay more each time you pay your premium. Please ensure the correct premium amount first before paying. If the premium is insufficient, your policy may lapsed or being terminated. Please take note.

What if my policy is an investment-linked policy (ILP)?

If this is the case, GST won't affect your premium, provided that there is sufficient funds for this additional deduction. Meaning, instead of paying extra premium, the additional GST charges will actually eat into your investment funds value. Anyway, insurance company will advise you to top-up on the investment portion of your ILP, should you need to do so.