During a challenging time like now, do you wonder how safe your savings are at the banks? Or how stable is your insurance provider?
I used to worry about what would happen to my savings if my bank were to go bankrupt. Fortunately, since learning about PIDM from TV advertisements and PIDM’s website, I no longer worry about my bank or insurer failing. Instead, I have more confidence in them.
For this post, in collaboration with PIDM, I’ll share the 4 benefits of PIDM to my personal finance and how they affect my financial decisions.
This sharing comes at the right time because October is Financial Literacy Month, organized by the Financial Education Network (FEN), an inter-agency grouping co-chaired by Bank Negara Malaysia and Securities Commission Malaysia together with 6 other government agencies including PIDM.
Their main objective is to enhance the level of financial literacy among Malaysians.
You can take advantage of the many financial literacy activities held throughout October if you are keen to learn about how you can be better with your money and reach your financial goals.
So, let’s invest a few minutes in this post, with the hope you too can make an informed decision to protect your savings and insurance benefits.
Table of Contents
- 4 PIDM benefits to my personal finance
- How do PIDM benefits affect my financial decisions?
- Final thoughts
4 PIDM benefits to my personal finance
In case you didn’t know, PIDM (Perbadanan Insurans Deposit Malaysia) is the government authority that protects:
- our deposits in PIDM member banks
- our insurance or takaful benefits from PIDM insurer members
But, PIDM does not protect everything. These protections come with certain criteria.
Let’s check out the 4 important benefits of PIDM and how they apply to me as a financial consumer.
1. PIDM protects my deposits in a member bank
Firstly, PIDM protects my deposits in a member bank through the Deposit Insurance System (DIS). In the unlikely event of a bank failing, PIDM will reimburse my insured deposits.
As long as my deposits meet the criteria below, they are eligible for PIDM benefits:
- the bank is among the 42 PIDM member banks around the country
- the deposit product is eligible for PIDM protection
- such as savings accounts, current accounts, fixed deposits
- the eligible deposit does not exceed RM250,000 per depositor per member bank
- with separate protection for 4 different categories (conventional and Islamic deposit accounts, joint accounts, trust accounts and business accounts)
With the deposit insurance offered by PIDM, I feel at ease knowing that there are mechanisms in place to ensure I have continuous access to my money in the banks while the bank goes through the winding-up process.
2. PIDM protects my insurance and takaful benefits
Secondly, PIDM ensures that I have continuous access to my insurance and takaful benefits in case an insurer member fails.
This protection system through the Takaful and Insurance Benefits Protection System (TIPS) covers both family takaful/life insurance and general takaful/general insurance.
The criteria to be eligible for TIPS protection benefits are as below:
- the insurance or takaful provider is among the 50 PIDM insurer members around the country
- the insurance policy or takaful certificate must be issued in Malaysia and denominated in Ringgit Malaysia
- the insurance or takaful benefits do not exceed the limits and scope of coverage
With TIPS, I do not need to worry about losing my insurance coverage in case my insurer is unable to honour the insurance benefits.
3. PIDM protection is free
Another PIDM benefit is the protection is free. PIDM is funded by annual premiums and levies paid by member institutions so as a depositor and an insurance policy owner, I don’t need to pay anything.
Member institutions cannot transfer the premiums and levies payable to customers, so if anyone tells you they need to collect PIDM protection fees, it is a scam.
Don’t pay anything, get the details and report to PIDM and the relevant authorities immediately. Some examples of unauthorised use of PIDM’s name and logo are updated on PIDM’s Consumer Alert page.
4. PIDM protection is automatic
Aside from no payment needed, PIDM protection is also automatic for all eligible depositors. There’s no need to apply or register for PIDM benefits.
Thanks to PIDM for free and automatic financial protection.
How do PIDM benefits affect my financial decisions?
Knowing the details of PIDM benefits does affect my financial decisions.
Below are 5 ways PIDM benefits affect my financial decisions.
1. I prefer to deal with PIDM member banks and insurer members
First and foremost, I’ll always prefer to patronize the banks and insurers listed under PIDM’s member banks and insurer member lists. I feel safe knowing my deposits and insurance benefits are protected by PIDM.
So far, I am glad that all my banks and insurers are PIDM members.
But, that does not mean I will not place my deposits with a non-PIDM member bank. I might consider services offered by a non-PIDM member bank if the service is appealing to me and serve a financial purpose such as offering a higher interest rate.
2. Be mindful of deposit products not eligible for PIDM benefits
Next, I’ll check if the deposit product at a member bank is eligible for PIDM benefits.
Currently, all of my deposit products are eligible for PIDM benefits, except for:
- my gold investment account
- two of my unit trust funds that distributed by one of PIDM’s member banks
For products not protected by PIDM, I will still keep them as I am satisfied with their return on investment.
By knowing the risks of not being under PIDM protection, I’ll:
- pay more attention to these products
- limit the amount of money placed with these types of financial services
3. Plan and separate my deposits to maximize PIDM’s protection
Due to the PIDM protection limit of RM250,000 per depositor per member bank, I’ll take note to plan and separate my deposits to make sure that if not all, then most of my deposits are eligible for protection.
For example, to make sure my RM500,000 fixed deposit is protected by PIDM, I can:
- separate into two fixed deposit certificates under two different depositor names at the member bank Bank A
- RM250,000 – Michelle
- RM250,000 – Michelle & Son
- utilize separate protection for conventional and Islamic deposits at the member bank Bank A
- RM250,000 – conventional fixed deposit
- RM250,000 – Islamic fixed deposit
- separate into two conventional fixed deposits at different member banks
- RM250,000 – Bank A
- RM250,000 – Bank B
Anyway, I won’t place the maximum RM250,000 per fixed deposit certificate. Because once the interest is added to the principle of RM250,000, the amount would exceed RM250,000. This means the interest is not eligible for PIDM protection.
Also, it’s important to note that the total protection limit for both savings and fixed deposit accounts under the same depositor at a member bank is RM250,000.
For further illustration of the protection limit of RM250,000 per depositor per member bank, you can refer to the DIS calculation on the PIDM website.
4. Engage a different insurer member if needed
As for my insurance coverage, at the moment all my family and my insurance benefits are within the limit and scope of PIDM’s TIPS.
In case I wish to have an additional life policy, I’ll take note of the aggregation rule.
For example, I’ll consider engaging a different insurer member if the total sum insured for my insurance policy’s death benefits from the first insurer member reaches RM500,000.
And I am aware that the investment portion of my insurance plan is not protected by PIDM. I am ok with that, as long as my other crucial protection such as my life and medical insurance are taken care of by PIDM in case my insurers are unable to do so in the unlikely event of it going bankrupt.
5. Willing to take more risks
PIDM makes me feel safe placing my savings with member banks.
That’s why I still keep a portion of my savings under fixed deposit accounts with member banks even though the interest rate is quite low compared with other investment options.
By knowing that a portion of my savings is safely tucked with member banks, I am willing to take more risk with other types of investments such as gold, unit trust and robo-advisor.
On top of that, when we place our deposits collectively in our bank, our bank is more likely to be able to offer lower borrowing rates. This is a good thing for borrowers and our nation’s economy as a whole.
Overall, I am more aware of the options to maximize my savings and protection needs by leveraging the free deposit insurance scheme provided by PIDM.
With the above sharing, I hope you are more aware of PIDM and its protection for financial consumers. Most importantly, do consider reviewing your current deposits and insurance or takaful benefits to see if they are covered by PIDM.
As for me, the protection from PIDM gives me the assurance that there are mechanisms in place to ensure I have continuous access to my money in the banks or my insurance benefits while my bank or insurer goes through the winding-up process.
That adds to my confidence in the financial system in our country.
Do you feel the same? How does PIDM’s protection affect your financial decisions? Feel free to comment below.
If you have inquiries related to PIDM, you can reach PIDM at:
- PIDM website
- PIDM Facebook Page (do follow them for the latest news and updates on tips to protect your hard-earned money and insurance or takaful benefits)
Lastly, do have a look at another great sharing about PIDM by Suraya from RinggitOhRinggit, What Does PIDM Do and Why Should YOU Care?
All images courtesy of PIDM