financialtreat – will explain about What are the Types of Life Insurance? Follow the Explanation! which you will get in the following article. let’s look at this article carefully!
Before getting to know the types of life insurance, it would be nice to first know what life insurance is and what needs to be prepared. Maybe many of us are thinking, what is it to have life insurance if we already have enough investment, an adequate monthly salary, children’s education funds have been allocated properly, until tertiary needs are already owned. It seems that our financial condition is safe, right?
What are the Types of Life Insurance? Come on, Follow the Explanation!
Let’s Get to Know What Life Insurance Is
What is life insurance? The definition of life insurance is a protection program for families in the event of unwante things, such as death, against the insurance policyholder.
Yes, like the example above, life protection is intende to provide financial security and definite protection to the family left behind if the insure dies.
Simply put, we as the insure are oblige to pay a certain amount of premiums periodically. Later when we die, the money will be given by the insurance company as a Sum Insure (UP) to the family left behind as stated in the contract agreement.
What to Prepare Before Having Life Protection?
1. Set Aside a Budget
It is not easy to allocate funds every month for things that we cannot enjoy at this time. For this reason, instill the proverbial “sickening first having fun then” in our minds.
Understand that the money we save at this time will be of great benefit to our family in the future. Ideally, set aside 10-20% of monthly income for a special allocation post to pay life insurance premiums.
2. Have Insurance While Healthy
Each insurance company has specific provisions for prospective buyers of their insurance. One of the most common is the state of health of the future owner of the policy. Even health conditions can also affect the cost of premiums that must be paid, usually the younger and healthier a person is, the lower the premium that must be paid. For that, immediately have insurance while we are young and healthy.
3. Adjust to Your Needs
Before choosing insurance, it’s a good idea to first study what products are offere and compare one insurance product with another. Make sure the life insurance benefits offere are in accordance with your needs.
For example, the benefits of total disability that allow us as insureds to get a sum insure when we are no longer able to work. In addition, also make sure the life insurance company you choose is a credible and trustworthy company.
Types of Life Insurance
There are several types of life insurance products, of course, each of which has different benefits. These types of life insurance aim to serve a variety of needs, abilities, and purchasing power of the community. Please see what are the following types of life insurance:
1. Term Life Insurance
Term life insurance or term life insurance has a function to provide protection to the insure within a certain period of time only. This life insurance usually offers contracts for 5, 10, or 20 years, with a fixe premium and is considere cheap.
You are recommende to choose this type of life insurance if you prioritize the future of your family, especially the education of the child. Suitable for those of you who have a need for large insurance costs but have limite financial capabilities.
If you choose this life insurance, some of the advantages are:
- You as a policyholder get freedom in determining the amount of premium according to your ability.
- The sum insure that you can get as a policyholder can reach billions of rupiah. This means that if the insure dies while the contract period is still active, then the insured’s family will get a large enough sum insure.
- Meanwhile, the disadvantages of this type of life insurance are:
- The insure can lose the premium money that has been paid or the premium is forfeite once the contract is complete if he does not experience health problems or dies until the contract period is over.
2. Whole Life Insurance
This type of whole life insurance provides whole life protection, although usually insurance companies limit protection benefits to only 100 years.
This life insurance is recommende for those of you who have no dependents and want benefits that are more than just death compensation, or you are intereste in the idea of long-term savings.
So, if you want life protection as well as savings for emergency needs such as paying hospital bills, you can consider buying this type of life insurance policy. The advantages of this type of life insurance are:
- The policyholder is able to get the cash value of the premium already paid.
- If you as the insure cannot pay premium installments periodically, you can use the cash value of the premiums that have been paid to pay the next premium.
- The insurance premiums you have paid will not be forfeite if there is no claim.
- When the contract expires, the sum insure will be given in its entirety.
Meanwhile the shortcomings are:
- The premium is greater than the term life insurance premium, it can even reach more than twice as much. The reason for this high premium is because the life expectancy of the Indonesian people is only 65 years for men and 70 years for women, so the possibility of insurance claims before the protection period ends is higher.
- The cash value of the total premiums already paid is not too large because the interest for this insurance is usually only 4% per annum, and this figure has not been tax deducte.
3. Dwiguna Life Insurance (Endowment Insurance)
This type of dual-purpose life insurance or endowment insurance as the name implies is an insurance that has two benefits, namely as term life insurance as well as savings. This means that you as a policyholder can get cash value from the insurance premiums that you have paid in the form of sum insure.
if the insure passes away within a certain period in accordance with the policy of the insurance policy concerne and can also withdraw the insurance policy within a certain time before the contract period ends.
This type of life insurance is recommende for those of you who want to ensure the availability of education funds for children, want to have funds for unexpected needs in the future, and want to have a larger pension fund. The advantages of this type of life insurance are:
- As explaine above, you can claim this life insurance policy before the contract period expires, for example for your child’s education fund. However, the withdrawal of these funds can only do once within a period of several years in accordance with the agreement that make.
- If for example you as the insure are still alive when the term expires, you will get the entire sum insure.
- Meanwhile the shortcomings are:
- Because this type of life insurance has two benefits, which are like combining the benefits of term life insurance with life insurance for life, so the premium is quite large, it can reach millions of rupiah per month.
4. Unit Link Life Insurance
This type of unit link life insurance combines the benefits of insurance with investment, and is most often offere by insurance agents. If you are intereste in investing but don’t understand about investing and want to keep ensuring your life still benefits from death protection, you can choose this type of life insurance. The advantages of this type of life insurance are:
- You as a policyholder not only get a guarantee of protection. But also a return on investment with a fairly high interest rate every year.
While the disadvantages are:
- The reciprocity of its investments is less significant when compare to pure investments such as stocks. Money markets, or mutual funds. If you are looking for a large profit from investing, you should not rely on unit link life insurance.
- The sum insure to be obtaine is relatively low, especially if the investment fails or only makes a small profit.
Read more financial independence:
- Emergency Financial Assistance Information for a Bright Future
- Information on How to Invest in Index Mutual Funds to Be Precise
Research Before Buying
You need to remember that before you buy a life insurance policy. It is recommende that you look for as much information as possible. And compare offers from several insurance companies for example relate to the protection offere. And the amount of premium you have to pay, and adjust it to your ability.
Also consider the amount of your dependents. And what funding needs will arise in the future in choosing this type of life insurance. The bottom line is that you need to do careful planning according to the needs.
Before choosing the life insurance product you will buy. So that the protection benefits you get from the insurance product are optimal. Remember. The principle of being careful before buying also applies to life insurance products so that you don’t feel a little regretful. Don’t make the wrong choice!