Tuesday, 3 December 2019

Insurance Purchase Provides A Protection


                I gain the idea of writing this post when I realized that there is a certain group of people, consist some of my friends, who do not know insurance deeply. What they know is just that insurance is used only when a person dies. Note that this post is not for advertising any insurance plan for you to purchase, but to share my experience and opinion on what I personally know about insurance.
                Do you know that there are two types of insurance available in the globe? In this post, we are not going to cover the two major categories of the insurance since I am sure that it had been well-known by you. Here, I would like to further narrow into the two major types of life insurance in specific.

Misconceptions on Life Insurance
                The most common misconception that I heard from my friends is life insurance always needs purchase and you will lose everything when you are still alive. This is why a lot of people do not want to buy life insurance. They even avoid from the agent from promoting the insurance plan to them since for them, life insurance is just about wasting money. The misconception also occurs when some of the people just buy an insurance with the too low of premium which results in the lower compensation to the beneficiaries when the holder of the policy dies. Indeed, life insurance at least provides certain amount of money as the source to finance the funeral of the holder and to pay the unpaid debt owed by the policy holder.
                Another misconception which needed to be changed is the life insurance is of no different with the general insurance. People are often confused with the term life insurance when they mismatch with some types of general insurance which are quite alike to life insurance, which is medical insurance. You will be shocked when you see that a person can go to claim money for himself when he just gets injured. He thinks that life insurance is going to cover everything that he losses in his life. This is the true story that an insurance agent told me when I had a conversation with her. Indeed, the life insurance that you and I know from the birth is all for the beneficiary, never for the policy holder. Therefore, hopefully through this post, there will be a little change on your knowledge on what actually a life insurance is.

Types of Life Insurance
                In general, life insurance can be divided into two types, namely the term life insurance and the term endowment life insurance. The major difference is the benefit that the policy holder will obtain from the purchase of the life insurance. For term life insurance, if the policy holder is still alive at the maturity date, then the beneficiary will not receive any benefit from the insurer. Instead, if the policy holder dies within the coverage period, then only the beneficiary will receive some certain amount of the benefit as stated in the agreement. Whereas, for term endowment life insurance, the beneficiary can be the policy holder himself or herself. This is totally different from term life insurance where the beneficiary will never be the policy holder himself. For term endowment life insurance, the beneficiary of the policy will receive benefit no matter the policy holder dies within the coverage period or still alive at the maturity date. The benefit that the beneficiary receives will be more if the policy holder is still alive.

                By comparing the two types of the life insurance, you may first think that the term endowment life insurance is better than a term life insurance. However, since the benefit of the term endowment life insurance is much more than the term life insurance, the premium for the term endowment life insurance is much higher. For example, the annual premium of a term life insurance is around RM400 (for AIA) while the annual premium of a term endowment life insurance is RM2400 (for Great Eastern). For term life insurance, the insurance policy will be terminated if there is no premium payment made. While, for term endowment insurance, a certain percentage of penalty will be charged on the accumulated fund if premium is not paid. The policy holder may be forced to surrender from the term endowment life insurance plan.
                Personally, I would rather recommend a term endowment life insurance instead of a term life insurance especially for students like you and me. This is because we can guarantee the fund, maybe used as the education fund for our children or the retirement fund for ourselves when the plan matures in 20-30 years. Even though the premium is quite high, I am sure that, by reducing daily unnecessary expenses, you can easily accumulate RM2400 in a year.
                I hope that you are benefited from my writing.

2019-12-03
3.40pm