Perbadanan Insurans Deposit Malaysia (PIDM) is a government agency established under the Akta Perbadanan Insurans Deposit Malaysia 2005 that provides protection for depositors in the unlikely event a bank is unable to repay depositors on their insured deposits.
What most people know about PIDM is that:
- It insures your deposits for up to RM250,000 with banks in Malaysia. So if your bank closes down, PIDM reimburses you with the money you saved (for up to RM250,000).
- Insurance is automatic. Protection is given as soon as the money is deposited.
- No fees or charges for PIDM. Insurance coverage is free.
There may be some facts about PIDM that you may not know:
1. You can be insured for more than RM250,000 (with different banks)
PIDM may insure you for only up to RM250,000 per depositor per bank, but that does not stop you from opening a new account with a different bank and being insured all over again. Say you have RM250,000 with Hong Leong and RM250,000 with RHB, you are actually insured for a total of RM500,000.
2. You can be insured for more than RM250,000 (with the same bank)
Joint-name accounts, trust accounts and accounts held by sole proprietorships, partnerships, professional practices and companies are protected separately. In short, you can have RM250,000 in your own account, RM250,000 in a joint-name account (say with your spouse), RM250,000 in a trust account for your kid, and even another RM250,000 in your sole proprietor company account. All of which will be protected by PIDM even if they are under the same bank.
3. Conventional account and Islamic account are protected separately
PIDM insured deposits placed under a conventional account and an Islamic account separately, for a maximum of RM250,000 each. That means you can be insured for up to RM500,000 with the same bank if you segregate your money between the two accounts.
4. Your money is protected even when the banks merge (for a limited time)
That’s right, say you have RM250,000 with bank A and RM250,000 with bank B and they merge to become bank AB, you’ll still be insured for the full RM500,000. However, this only lasts for a period of two years or upon the maturity of your deposits or upon full withdrawal of the deposits, whichever comes first.
5. Malaysian or not, you are covered
PIDM offers protection for up to RM250,000 per depositor per bank regardless of nationality or place of residency. So whether you are a Malaysia, a foreign investor, an expat or a Malaysian living oversea, you are covered as long as your money is deposited into a bank recognized by PIDM that is located within Malaysia.
6. A similar insurance exists for Takaful certs and insurance policies
Brought into effect on 31st December 2010, the Takaful and Insurance Benefits Protection System (TIP) protects owners of Takaful certs and insurance policies from the loss of their benefits in the event that an insurer fails. The plan is also administered by PIDM.
Now, there might be things about PIDM you might heard of but are not true:
1. You lose anything above RM250,000 if a bank closes down
Actually, just because the amount isn’t covered by PIDM doesn’t mean it’s gone for good. According to PIDM themselves, you can file a claim with the liquidator of the bank to recover any amount above the insured amount.
2. Malaysians are the only ones to have insurance such as PIDM
No, deposit insurance such as PIDM is recognized internationally as an important form of consumer protection. In fact, it is implemented in over 100 countries, with the earliest system dating back to 1930s. Malaysia’s version was introduced only in 2005.
3. Everything in my bank is covered as long as it’s within RM250,000
There are in fact plenty of deposits not covered by PIDM, which significantly include gold-related investment products or accounts. Also not covered are unit trusts, shares and stocks. The full list of banking products not insured can be found in PIDM’s website.
4. PIDM covers every institution that i deposit money into
Not really. Though PIDM does cover an exhaustive list of banks, it does not cover investment banks, overseas branches of domestic banking institutions and development financial institutions (eg. Agro Bank, Bank Simpanan Nasional etc.). It also does not cover non-bank financial Intermediaries such as EPF and building society (eg. Malaysia Building Society Berhad).
What PIDM does cover are:
- Savings accounts, current accounts, fixed deposits, foreign currency deposits, principal-guaranteed conventional structured products, Islamic deposit accounts such as wadiah savings accounts and Mudharabah investment deposits and bank drafts, cheques, other payment instruments made against a deposit account.
What this means if you have lots of deposits in banks (and want all the money to be insured)
1. Diversify Outside
Spread your deposits out with different banks. There are over 40 recognized member banks of PIDM so technically, you’ll need to have well above RM10 million before you “run out” of banks that offer you deposit insurance.
2. Diversify Within
Open joint-name accounts with your spouse and with your kids, or perhaps a trust account for your children. If you’re a business owner, manage your money wisely between your own account and your sole proprietor company account. If you already have an Islamic account, think about opening a conventional account, and vice versa.
**Refer to Infographic PIDM.
https://www.imoney.my/articles/pidm
