How Does Life Insurance Work? Let’s Read the Explanation!

financialtreat – will you explain How Does Life Insurance Work? Let’s Read the Explanation! which you will get in the following article. let’s look at this article carefully!

Indeed, such events in life cannot be completely avoided. However, you can still try to anticipate it by utilizing a financial product called insurance. Insurance itself has various types according to the uses and benefits and how life insurance works needed by the owner.

One of the must-haves is life insurance which is able to provide financial protection for the families of customers who have died. So, what exactly is life insurance? For those of you who are curious, check out the reviews about the meaning of insurance, benefits, types, and how life insurance works. Don’t get tired of reading, yes.

How Does Life Insurance Work? Let’s Read the Explanation!

Definition of Life Insurance

Life insurance is a form of insurance business that provides services in overcoming risks that are closely related to a person’s life. Insurance is aimed at covering people against unexpected financial losses caused by the death of a person within a certain period of time.

This life protection benefit is as a guarantee of certainty to the insured and family in facing various life risks such as critical illness, disability, and death.

Life Insurance is indeed not available for us to enjoy the results immediately. Because indeed the benefits are not immediately felt in the owner but by our heirs. One thing you need to remember, that insurance is bought not to die, but to ensure that the person left behind remains prosperous.

What are the Benefits of Life Insurance?

  • Providing compensation when the insured party dies in the amount of 100% or more of the sum insured.
  • Provision of total permanent disability compensation with a nominal value of up to 100 percent of the sum insured.
  • Providing compensation for partial permanent disability or partial loss of function of the limbs, such as, paralysis of the legs, with the total sum insured in accordance with the proportion written on the insurance policy.

What are the Types of Life Insurance?

There are 4 types of life insurance that are generally submitte by the public, including the following.

Term Life Insurance

Provide protection benefits within a certain predetermine period of time. For example, term life insurance will only provide protection benefits with a period of 1, 5, 10, 20, or a maximum of 30 years.

With the benefits of protection in such a limite time, this product is ideally chosen by people who need short-term protection and not non-unit link type life insurance. The advantage of this type of term insurance is that the premium cost is relatively more affordable and can be adjuste to financial conditions.

Even so, the Sum Insure or UP offere is quite high, reaching hundreds of billions, and provides additional protection benefits as neede, such as permanent disability compensation, critical illness, debt repayment guarantees, and so on.

Whole Life Insurance

As the name implies, this type of insurance will provide lifetime protection benefits to its customers. Depending on the policies and provisions of the service provider, whole life insurance is able to provide coverage until the policyholder is 90 to 100 years old.

Some of the advantages of whole insurance are guarantee life protection and cash value benefits.

With these advantages, the ideal whole insurance is chosen by customers who are preparing for the needs of life during retirement and other financial plans. It’s just that the nominal premium from this insurance tends to be expensive, it can even be 2 times that of the term type insurance premium.

Unit Link Life Insurance

Like other unit-linke insurance products, unit link life insurance is an insurance product that combines protection benefits from various risks and investment benefits. Because it combines 2 financial products at once, the premiums paid by the customer will be divide by a certain ratio to insurance benefits and lump sum investments.

With this more complete way of working, this type of insurance can be cashe back when the customer has never submitte a protection claim. When one day they are unable to pay the premium, the customer can also divert part of the investment funds to pay it off. Of course, the benefits of investment activities can be fully obtaine by customers without having to bother managing their capital.

However, the drawback is that the benefits of investment cannot be felt optimally because they have to be cut off insurance costs. In addition, the risk of loss due to investment can also affect the insurance balance and reduce the benefits.

Dwiguna Life Insurance

Offers protection benefits that come with savings. Like the previous type of insurance, this product will divide part of the premium into a savings account, and the rest will be allocate to insurance protection benefits.

When choosing this type of insurance, you can feel the advantage of being easy to disburse insurance funds before the duration or period of the insurance ends. In addition, if the customer is still alive until the end of the insurance active period, all sum insure can be recovere.

With these advantages. Dual-purpose life insurance is suitable to be propose by customers who have long-term financial goals and are primary. Such as, education costs and pension costs. However, for the shortage, the nominal premium tends to be more expensive. It can even reach millions of Rupiah every month.

how life insurance works

Insurance has indee become commonplace nowadays. But it turns out that the level of public awareness of this financial need is still low. Even though having insurance, especially life insurance, has many benefits.

By having life insurance, we will feel the benefits of uncertainty in this life. At least we can feel at ease when the breadwinner in your family has left us. Then your family has no financial difficulties.

Life insurance has evolve a lot from time to time. And all of it always offers a wide range of services for the community. The products of insurance are also not only for death but also for health. Critical illnesses, accidents and others that suit the needs of each person.

Well, in unit-linke  insurance there are two important elements, namely protection and investment. If you are intereste in insurance but also want to have an investment. You can buy this unit link insurance.

The return on investment in this unit link insurance depends on market conditions and stocks. So this unit link insurance is also calle long-term insurance. But like other investment products, unit-linke insurance certainly does not always promise profits.

Therefore, you need to adjust the choice of insurance provisions according to your needs. And the ability to pay premiums. And you also have to understand the product of unit link life insurance itself. Here’s how unit link life insurance works.

The workflow of unit link insurance can be explaine as follows. The initial premium paid by the policyholder will be allocate from protection to deduction to pay the acquisition fee.

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This acquisition fee is a fee charge to the customer when purchasing the policy. The fee is usually use to pay for the company’s operational activities, including commissions from insurance marketers. In addition, insurance premiums are also include in the selecte investment instrument.

A certain amount of premiums that are include in this investment instrument then produce investment returns. The proceeds from this investment will later be use to pay insurance costs, additional insurance costs, and administrative costs.

So, insurance protection is pay from the results of the investment. The investment value of the policyholder is deducte regularly to pay the cost of insurance. After all payments are complete, there is a value that can be taken by the policyholder. This is what can be disburse for education funds or pension funds.

For the record, as long as the value of the policy is sufficient to pay the cost of insurance. The insurance protection remains active. But if it is not enough, then the insurance company will ask the customer to top up funds. Or the policy will be lapse (cancele) when the policy value is no longer enough to pay the insurance fee.

So more familiar with unit link insurance and intereste in buying. Or maybe discussing with life insurance marketers from AAJI? Immediately determine which unit link insurance choice you want to take. But what you need to remember is that the value of the policy is very dependent on investment performance. The name investment must have potential risks, including losses.


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