By Keith Wong, FAR (BNM) · IFAR (BNM) · LFP (SC)
Table of Contents
Quick answer: The headline change from Budget 2026 for insurance planning is that the RM3,000 life insurance and Takaful tax relief — previously only for policies on yourself and your spouse — now also covers policies you hold on your children. A few related reliefs shifted too. Here’s what actually changed, and what to double-check before you file.
Why this matters beyond the tax filing itself
Tax relief isn’t just an accounting detail — it changes the real cost of a decision. When a relief expands to cover a new category of policy, it lowers the effective cost of buying that coverage, which is worth factoring into any conversation about protecting your family, not just your annual e-Filing.
The headline change: children’s policies now qualify
Under the existing structure, individual taxpayers could claim relief of up to RM3,000 for life insurance premiums or Takaful contributions — but only for policies on their own life or their spouse’s. Budget 2026 (tabled October 2025, effective for Year of Assessment 2025 onward) extends this relief to include life or Takaful protection policies purchased for children as well.
In practice, this means if you’ve bought (or are considering buying) a protection or education-linked policy for a child, the premiums may now fall within the same RM3,000 relief category that previously only applied to policies on yourself and your spouse.
How this interacts with your existing EPF relief
This is the part most people get wrong when relief categories change: for most employees, the RM3,000 life insurance/Takaful relief and the RM4,000 EPF (or approved scheme) relief share a combined ceiling, rather than stacking independently without limit. Broadly:
- If you’re an EPF contributor, your life insurance/Takaful relief and EPF relief together are generally capped at a combined RM7,000 — so maximising one can reduce headroom on the other.
- Pensionable public servants, who contribute to KWAP rather than EPF, are generally entitled to claim up to RM7,000 for life insurance/Takaful premiums alone, since they don’t have a competing EPF relief claim.
The children’s-policy expansion sits inside this same RM3,000 category — it widens what qualifies, it doesn’t add a separate new pool on top of the existing combined ceiling.
A related change worth knowing: medical and education insurance relief
Separately from the life insurance/Takaful category above, premiums for medical or education insurance (on yourself, your spouse, or your child) sit in their own relief category. Some official guidance for the current assessment year points to this category increasing from RM3,000 to RM4,000 — but given how often relief limits get adjusted year to year, this is exactly the kind of figure worth confirming directly on LHDN’s e-Filing portal or with a tax agent before you rely on it for your own filing.
What this actually means for your planning conversation
If you already hold a protection or education policy for a child, it’s worth checking whether it now qualifies under this expanded relief — many parents assume child policies sit entirely outside tax relief, which was broadly true before this change. If you’ve been considering starting one, the effective after-tax cost is now somewhat lower than it was last year, which is worth factoring into the timing of that decision rather than treating it as a minor footnote.
Common questions
Does this mean I can now claim RM3,000 per child, on top of my own policy?
No — the RM3,000 relief is a single combined ceiling covering yourself, your spouse, and now your children’s policies together, not a separate RM3,000 allowance per family member. Confirm the exact mechanics for your household with LHDN or a tax agent before filing.
Do Takaful contributions for a child qualify the same way as conventional insurance?
Yes — the relief category covers both conventional life insurance premiums and Takaful contributions on the same basis.
I’m a pensionable civil servant — does the RM7,000 relief also now cover my children’s policies?
The children’s-policy expansion applies within the same life insurance/Takaful relief category that pensionable public servants can claim up to RM7,000 against (since they don’t have a competing EPF claim) — but confirm your specific entitlement with LHDN, since public-sector tax treatment can have additional conditions.
Where should I check the exact current figures before I file?
LHDN’s official e-Filing portal and guidance notes are the authoritative source for the year you’re filing — tax relief limits are reviewed and adjusted periodically, so a figure that was correct last year isn’t automatically correct this year.
Get in touch
Not sure whether an existing policy — yours or your child’s — now falls under this expanded relief, or whether it’s worth adjusting your coverage with this in mind? Send me what you have and we’ll go through it on WhatsApp: +6016-336 9321.
This article is for general information only and does not constitute personalised tax or financial advice. Tax relief figures, eligibility conditions, and caps are set by the Malaysian government and Inland Revenue Board (LHDN), and are subject to change. Please confirm current relief amounts directly with LHDN or a licensed tax agent, and consult Keith Wong directly regarding how any policy or coverage decision fits your broader financial plan.