🛡️ “The Only Insurance That Pays You Back: How ILPs Protect You, Grow Your Money, and Cut Your Tax Bill”
Most young Malaysians see life insurance as an expense — something you only buy when you start a family. But in reality, life insurance is the foundation of every smart financial plan, especially if you choose an investment-linked policy. It gives you protection, tax savings, and the opportunity to grow your wealth — all in one flexible plan that evolves with you.
The Malaysian government allows tax relief of up to RM3,000 specifically for life insurance premiums (or up to RM7,000 combined with EPF contributions) under Section 49(1)(a) of the Income Tax Act. This policy was designed to encourage Malaysians to protect themselves financially while saving for retirement. To put this into perspective, if your chargeable income is RM100,000 a year, this is what your income tax looks like:
| Chargeable Income (RM) | Tax Rate | Tax Payable (RM) |
|---|---|---|
| 0 – 35,000 | Progressive | 600 |
| 35,001 – 100,000 | 13% | 8,450 |
| Total Tax Payable | ≈ RM9,050 |
After you contribute to an investment-linked life insurance plan with RM3,000 premium, your taxable income reduces to RM97,000. This means you save directly on your taxes:
| Item | Amount (RM) | Effect |
|---|---|---|
| Life insurance premium | 3,000 | Deductible from chargeable income |
| Revised chargeable income | 97,000 | — |
| Tax saving (13%) | 390 | You save RM390 in tax |
That’s RM390 you get to keep every year — money you would otherwise pay to LHDN. Over 35 years, you could save around RM13,650 just from tax relief alone, on top of the insurance and investment benefits you’ll accumulate.
Now, here’s how investment-linked life insurance actually works. Each RM3,000 you pay is split between two parts — a portion goes to insurance charges to provide your life protection, and the rest is invested into unit-linked funds to grow your wealth. The cost of insurance is calculated by cents per RM1,000 of coverage, depending on your age, gender, and health condition. For a healthy 25-year-old, the charge may be around RM0.90 per RM1,000 of coverage per year. That means for RM250,000 coverage, the insurance charge is about RM225 a year, while the remaining RM2,775 from your RM3,000 premium goes directly into investment funds.
This system allows your money to do two things at once — protect and grow. As you get older, the cost of insurance will increase slightly, but your investment value can continue to compound, offsetting that rise. The result is a long-term balance between protection and wealth accumulation.
If a 25-year-old employee contributes RM3,000 per year into an investment-linked plan until retirement at age 60, here’s how it could grow based on different market scenarios:
| Scenario | Annual Growth Rate | Cash Value at 60 (RM) | Life Coverage Value (RM) | Total Tax Savings (RM) |
|---|---|---|---|---|
| Pessimistic | 3% | 170,000 | 250,000 | 13,650 |
| Moderate | 5% | 250,000 | 300,000 | 13,650 |
| Optimistic | 7% | 370,000 | 400,000 | 13,650 |
Even in a conservative case, you would end up with around RM170,000 in cash value and a life coverage of RM250,000, while saving more than RM13,000 in tax over your career. And if anything unexpected happens along the way, your family receives the insurance payout instantly — ensuring their financial future is secured.
This is why life insurance remains a crucial part of any financial plan. You can save and invest all you want, but no investment can replace protection. You might have RM100,000 in savings, but if you pass away tomorrow, that amount doesn’t multiply for your loved ones. With a life insurance plan, a RM3,000 yearly premium can translate into RM300,000 or more in instant coverage — that’s true financial leverage.
An investment-linked life policy grows with you. As your income rises, you can increase your investment portion to build more wealth. As your responsibilities expand, you can add riders for medical, critical illness, or income protection. It’s flexible, tax-efficient, and designed for Malaysians who want to protect today and grow tomorrow.
In short, an investment-linked life insurance plan isn’t just a safety net — it’s your personal growth fund with a built-in shield. The earlier you start, the cheaper your cost per RM1,000 of protection, and the more your investments have time to compound. It’s not just life insurance; it’s a lifelong strategy for wealth and security.
Important: The information and opinions in this article are for general information purposes only. They should not be relied on as professional financial advice. Readers should seek independent financial advice that is customised to their specific financial objectives, situations & needs.
Published By:
Terrence Teh – Associate Consultant | Personal Finance & Cross-Border Planning (Malaysia–Australia)
I’m Terrence Teh, an Associate Consultant with FA Advisory, passionate about helping individuals and families achieve clarity, structure, and growth in their financial journey.
With a background in accounting, tax, and paraplanning for Australian advisory firms, I bring both local Malaysian insight and international financial planning expertise. I am currently pursuing the Registered Financial Planner (RFP) certification to deepen my knowledge in estate planning, retirement strategies, and wealth management.
I specialize in:
Cross-border planning for Malaysian families with ties to Australia (education, property, retirement, investments).
Insurance & risk management, including corporate employee benefits and group insurance.
Wealth accumulation & retirement planning, with strategies tailored to long-term growth and protection.
My goal is to make financial planning simple, structured, and aligned with your life goals, whether you are starting your career, expanding your family, or planning your legacy.
